voyage charter freight rates

Voyage Charter : Definition & Full Guide

• By MascotMaritime
• April 22, 2022
• 3 mins read

Table of Contents

What is a voyage charter.

Voyage charter definition : The voyage charter is a contract (voyage charter party) between the shipowner and the charterer wherein the shipowner agrees to transport a given quantity of a shipment, using a pre-nominated vessel for a single voyage from a nominated port (say X) to a nominated port (say Y), within a given time period.

Who is a voyage charterer? What is the freight & voyage charter party? 

The person who charters the vessel is called the voyage charterer , the payment is called freight & the contract is called the voyage charter party. The freight rate is calculated as $/tonne of shipment. 

What is the most significant part of a voyage charter party?

The most significant parts are the description of the voyage, size & capacity of the vessel, cargo, the allocation of duties and costs in connection with loading and discharging, the specification of the freight, and the payment of the freight, the laytime rules, the allocation of the liability for the cargo and the allocation of other costs and risks.

Depending on the circumstances, other questions and clauses can be very important in the negotiations between the owners and the charterers.

In this type of charter, the vessel must be in the position that the owner specified when the charter was concluded & the vessel must, without undue delay, be directed to the port of loading.

At the port of loading, the charterer must deliver the agreed cargo. 

The cargo must not be dangerous cargo unless otherwise agreed. The cargo must be brought alongside the ship at the loading port & must be collected from the ship side at the port of discharge.

Mainly with the bulk cargoes, the charterer often undertakes to pay to load and discharge & often clauses of f.i.o or f.o.b are met. Very often parties agree on f.i.o.s or f.i.o.s.t terms.

In voyage charter, the discharge port need not be nominated in the charter party & in such cases, the charterer must have the right later to direct the vessel within a certain range to a specific port of discharge.

In a voyage charter where the charterer carries out loading &(or) discharging, it is generally agreed that the charterer will have a certain period of time at his disposal for loading & discharging of the vessel & it is called laytime .

If the charterer fails to load and(or) discharge the cargo from the vessel within the laytime, then he has to pay compensation for the extra time used called demurrage . Once in demurrage always in demurrage.

In other cases, if the charterer loads &(or) discharges the cargo from the vessel more quickly than the agreed laytime time, then he is entitled to claim compensation (only if agreed earlier) called despatch money.

In voyage charter, unless lumpsum freight is paid, the owner may claim freight compensation if less cargo is delivered, or cargo is delivered in such a way that ship’s capacity cannot be utilized due to broken stowage . This freight compensation is called deadfreight .

Voyage charter party agreement example:

Click here to see the example of a voyage charter party (NORGRAIN 73).

What are the factors which influence the freight rate in a voyage charter market?

In the voyage charter market, rates are influenced by cargo the charterer must deliver the agreed cargo size, commodity, port dues, and canal transit fees, as well as delivery and redelivery regions.

In general, a larger cargo size is quoted at a lower rate per tonne than a smaller cargo size. Routes with costly ports or canals generally command higher rates than routes with low port dues and no canals to transit.

Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates because such voyages generally increase vessel utilization by reducing the unloaded portion (or ballast leg) that is included in the calculation of the return charter to a loading area.

What are the costs paid by the shipowner & charterer in a voyage charter?

In a voyage charter, the shipowner retains the operational control of the vessel and pays all the operating costs (crew, fuel, freshwater, lubes, port charges, extra insurances, taxes, etc.), with the possible exclusion of the loading/unloading expenses. 

The charterer’s costs are usually costs & charges relating to the cargo.

What are the types of voyage charter?

It can be of the following types:

• Immediate  –  which is carried out within weeks of the contract agreement and the agreed freight rate is called the spot rate.
• Forward –  which is scheduled & fulfilled at the agreed time in the future, for example in say three months.
• Consecutive – which refers to several same consecutive voyages.

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Time Charter vs. Voyage Charter: Everything You Need to Know

Navigating maritime logistics demands a robust understanding of chartering options—each type has unique implications for operational strategy and financial outcomes.

Choosing between a time charter and a voyage charter isn’t merely a logistical decision; it’s a strategic one that impacts cost, control, risk management, and operational flexibility.

In this article, we delve deep into the two main types of charters – a time charter and a voyage charter – exploring their advantages and disadvantages, and offering a comparison between the two.

The goal of this article is to:

• equip you with the essential knowledge to navigate these choices 
• ensure that your chartering decisions align seamlessly with your business objectives and market conditions 
• enhance your company’s competitive edge in the global marketplace.

But before going any further, it’s important to understand the terms used by the industry. Here are the most common: 

Time Charter

A time charter   grants the charterer the use of a vessel and its crew for a specified period from a shipowner. The ship owner and the charterer will agree on the exact period the lease will run for. 

However, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this. The charterer can direct the vessel’s movements and cargo operations within agreed and imposed contractual limits. 

The shipowner retains responsibility for the vessel’s operational aspects, including maintenance (ensuring the vessel meets all necessary maritime safety standards), and crewing, but the charterer must pay for fuel and supply costs, as well as the cost of cargo operations and port charges. 

This arrangement is akin to leasing a car, where the lessee drives but doesn’t worry about long-term maintenance. For example, a charterer might lease the ship for six months, during which time they have the flexibility to choose their routes and destinations.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period, giving the ship owner increased security.

Voyage Charter

A voyage charter focuses on the transportation of a specific cargo on a single voyage between designated ports.

The most common way to pay for this type of charter is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport and is preferred when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The second most common payment method is a lump sum – one payment that allows the charterer to transport as much cargo as they wish. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

Under this contract, the ship owner is tasked with delivering the cargo and handling all nuances of the voyage itself. Nearly all costs are covered by the ship owner and include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

Before the charter contract is signed, the parties will agree on the end destination, any ports of call, laytime, and whether there will be any restrictions on cargo. The ship owner pays for all costs at the port of call. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments

Voyage and Time Charters

There are other definitions which are useful to understand.

Charter party

Central to these contracts is the charter party —the formal agreement that stipulates the specific terms, conditions, and obligations agreed upon by the ship owner and the charterer. 

This document is crucial as it governs what each party is responsible for, including costs, risks, and how disputes are resolved.

Freight Rates

Freight rates, a critical element of the contract, determine the cost associated with transporting cargo and are influenced by various market conditions and ship specifications.

These rates not only affect the profitability of a voyage but also influence global trade patterns.

Cost Analyses

Cost analysis in this context involves evaluating the expenses related to different chartering options to determine the most cost-effective approach. 

This analysis is essential for chartering managers and financial analysts who aim to optimize operational costs against market conditions. 

The Statement of Facts (SoF) is an important maritime document that logs vessel activities while in port. It includes times of arrival and departure, cargo handling details, and records of any delays or incidents, providing a factual foundation for operational and legal evaluations.

Freight and Charges

Lastly, understanding freight & charges—the costs incurred during the shipment of cargo—is vital. These charges can vary widely depending on the route, type of cargo, and specific terms of the charter party.

Once again, the use of historical data from SoFs can assist in providing clarity and transparency on these fees.

Advantages and Disadvantages of a Time Charter

Time chartering presents a unique set of advantages and disadvantages that vessel chartering managers, operations VPs, and demurrage cost analysts must weigh carefully when strategizing for optimal operational flexibility and cost efficiency.

Advantages:

• Flexibility in Operations : Time charters offer charterers significant control over the vessel’s employment, including the types and routes of cargoes, as well as one of the most important: access to a vessel. This flexibility is invaluable for adapting to changing market conditions or specific logistical requirements. Using no-code workflows to streamline processes and voyage turnaround simulators can support maritime operations and greatly improve flexibility.
• Cost Predictability : With a fixed daily hire rate, companies can better forecast and manage their shipping expenditures. This predictability aids in budgeting and financial planning, reducing the unpredictability associated with fluctuating freight rates in spot market dealings.
• Reduced Exposure to Market Volatility : During periods of market volatility, time charter arrangements protect the charterer from soaring freight rates, as the hire rate remains constant regardless of market conditions.

Disadvantages:

• Long-term Commitment : One of the primary drawbacks of time charters is the requirement for a longer-term commitment to a vessel. This can be a double-edged sword, especially if market rates fall below the agreed hire rate, potentially leading to higher-than-market operational costs.
• Operational Costs and Risks: While the shipowner handles maintenance and crewing, the charterer is responsible for costs related to the voyage, including fuel, port charges, and other variable expenses. 

Charterers should employ proactive cost tracking, negotiate favorable fuel clauses, utilize cost-efficient routing software, and maintain transparent communication with shipowners about anticipated expenses and operational strategies.

For example, a well-prepared and accurate Statement of Facts (SoF ) can provide detailed information about the events that occurred during the time a vessel spent at port.

However, when the opportunity to properly analyze the SoF has not been made available, disputes over ambiguous statements may arise.

On one side, charterers will try to leverage the delays that happened to decrease demurrage. Shipowners, on the other hand, may challenge a charterer’s laytime statement based on the events that are available in the SoF.

Time charters often include terms for demurrage (charges when the charterer uses the vessel beyond the agreed period) and dispatch (rewards for completing operations early). The SoF provides the necessary data to calculate these charges or rewards accurately, documenting the exact time spent during loading and unloading.

• Lesser Control Over Maintenance : Charterers have limited control over the maintenance and condition of the vessel, relying on the shipowner to maintain standards. Poor maintenance can affect cargo schedules and overall shipping efficiency.

Maintenance of the vessel can also have a direct effect on the charterer due to new emissions regulations. 

Keeping track of current changes in maritime emissions regulations is a challenging task. With so many initiatives and new norms being implemented, trying to provide frameworks to capture and report on emissions, makes the topic extremely complex for operators, shipowners, and commodity manufacturers.

Advantages and Disadvantages of Voyage Charter

Voyage charters represent a different approach compared to time charters, focusing on specific trips rather than extended periods. This method suits operations that require precise cargo deliveries without long-term ship commitment, but it also carries its own set of pros and cons.

• Direct Cost Association : The major appeal of voyage charters lies in their direct cost association with individual voyages. The charterer is not liable for any costs, except the initial charter fee, and is not responsible for finding a crew. Charterers pay per trip, making it easier to allocate costs directly to specific cargoes or projects. 
• No Long-Term Commitment or Contract: Unlike time charters, voyage charters do not require a long-term commitment to a vessel, providing flexibility to switch between ships and routes as dictated by cargo needs or market conditions.
• High Control Over Cargo Operations : Charterers maintain extensive control over the loading and unloading processes, ensuring that handling aligns with their standards and schedules. This is particularly beneficial for sensitive or high-value cargoes. 
• Vulnerability to Market Fluctuations : While time charters protect against market volatility, voyage charters expose charterers to fluctuating freight rates. During peak times, costs can escalate significantly, affecting overall profitability and a lack of flexibility for the charterer.
• Inconsistent Costs (and higher initial costs): The costs in voyage charters can vary widely from one trip to another, influenced by factors like fuel prices, port fees, and canal dues. This inconsistency makes budgeting and financial planning more complex.

For example:

a. Exceeding laytime – the time allowed for loading and unloading cargo at ports – can lead to demurrage charges. Having a well-prepared SoF ensures that the arrival, cargo operations, and departure times are documented, which are key data points for laytime calculations.

b. New emissions regulations leading to the use of specific fuels or ship adjustments may soon be passed on to charterers via higher freight costs. For many ships, technical modifications may be the only realistic way to attain the required certifications and to be under the emissions limit, impacting the commercial operation of the vessel.

• Dependency on Ship Availability : Charterers are at the mercy of market availability. During periods of high demand, finding suitable vessels can be challenging and more expensive, potentially leading to delays and increased operational risks.

How to Choose Between Time Charter and Voyage Charter: Factors to Consider

Choosing between a time charter and a voyage charter is a strategic decision that hinges on several criteria to be weighed carefully to align with organizational objectives and the dynamic nature of the maritime industry.

Here we present six criteria that every chartering manager or analyst should consider.

• Duration and Frequency of Cargo Needs

Consider the length and frequency of your shipping needs. 

Time charters are more suitable for longer and more regular shipping requirements, providing stability and predictability. These agreements are signed only for a limited period, without providing any specified route to the other party. Throughout this charter period, the Charterer can use the vessel for trading on the recognized trade routes without restrictions. 

On the other hand, voyage charters are ideal for single, occasional, or irregular shipments. These contracts are signed for carrying a particular quantity of goods on the preset by the two parties. They also are obliged to carry the stated commodity onboard between pre-decided ports only. After the said trip is completed, the contract is automatically terminated.

• Market Conditions and Freight Rate Volatility

The current and anticipated market conditions play a crucial role. In a volatile market with rising freight rates, a time charter might lock in a more favorable rate for a longer period. 

Conversely, in a stable or declining market, voyage charters might offer more cost-effective and flexible options.

• Operational Control

Evaluate the level of control you need over the vessel’s operation. 

Time charters offer more control over the vessel’s itinerary and operations, beneficial for complex logistics operations.

Voyage charters provide control over the cargo but less so over the vessel’s operations.

• Financial Planning, Profitability, and Budget Constraints

Assess your financial flexibility

Time charters require a substantial and consistent financial commitment, which is predictable but potentially higher in the long term. 

Time charters provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. 

However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters , while potentially more variable in cost, do not require long-term financial commitments and can be adjusted according to budgetary needs. The absence of a long-term commitment allows companies to avoid the financial drain of a non-performing asset, which is possible in a time charter if market conditions worsen. 

Typically, payments in voyage charters are tied to specific milestones, such as loading or unloading completion, which can help in planning cash flow. 

• Cargo Specificity and Handling Requirements

Consider the nature of the cargo. Special handling requirements, sensitivity, and value of the cargo might dictate the need for more direct control over handling processes, favoring voyage charters.

• Risk Tolerance

Finally, analyze your company’s risk tolerance. 

Time charters minimize exposure to market fluctuations but involve commitment risks . They provide more predictable cash flow due to fixed daily hire rates, which can be advantageous in a volatile market as they protect against rate increases. However, they may result in negative cash flow if the market rates decrease significantly below the charter rate agreed upon, as the charterer still must pay the fixed rate.

Voyage charters offer flexibility but expose the charterer to market rate risks and operational uncertainties. Profitability and effectiveness in managing cash flow depend on the charterer’s ability to manage and mitigate risks associated with market volatility and operational uncertainties.

By automating manual workflows with available low-code technology , companies can save and reduce risk while maintaining data integrity and real-time visibility of their voyages’ most essential KPIs. 

To reduce risk, dedicated software to automatically assign tasks and notify stakeholders prevents constant back and forth through emails or updating of spreadsheets can be implemented. Stakeholders can be given dedicated access to track their inbound shipments, schedule changes, and collect documents.

If you want the lowest possible ongoing costs, the clear winner is the voyage charter.

Why? Because they don’t require a long-term contract. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid, in general.

But, when it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter.

A ship owner is more open to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further. As the vessels are leased for long periods, the vessel can be used to travel anywhere, without restriction.

In making your final decision, engage with stakeholders, including operations managers, financial analysts, and logistics coordinators, to understand the full implications of each option.

Besides, using a holistic approach to evaluate these factors will guide you toward the most strategic chartering decision for your specific circumstances.

• April 30, 2024

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Voyage Charter vs Time Charter

Ships, boats and other recreational vessels are owned by a large number of individuals who often purchase them as assets. They do not use these vessels for shipping goods or for ferrying passengers.

Instead, they often lend them out to third party organizations who use them for a variety of purposes. In maritime legal terms, this lending process is known as chartering. Chartering is an important concept of the global maritime trade sector, and is of different types.

This article will delve into the differences between two specific categories of charters – the voyage charter and the time charter.

What is a Charter?

A charter is an agreement between two or more groups known as charter parties, regarding the leasing of a vessel for a fixed set of conditions. The terms and conditions stipulated in the charter are binding on all the parties in the agreement and covers a wide variety of clauses and possible scenarios that may arise. It is considered to be an official document in legal aspects and is required by Admiralty Law to be drawn up in case of any form of vessel hiring or leasing.

A shipowner is the first party in the charter agreement who owns the vessel under consideration. The charterer is an individual or organization who is in need of a ship.

The charterer may have cargo that he wishes to transport, or may further lease out the vessel to third parties.

The shipbroker is a link between ship owners and charterers, and aids in finalizing the terms of the agreement. The terms of the agreement include the duration of leasing, fees, payment instalments, regulations on usage, and detailed surveyor reports on the condition of the ship.

Payment is termed as a freight rate and is remitted to the shipowner at fixed intervals decided in the agreement.

Surveyor reports are important in chartering, as they ensure that the vessel is seaworthy prior to being chartered. Similarly, on completion of a charter agreement, and before final payment formalities, another survey report is conducted to ensure that the vessel has sustained no damage during the lease period.

The charter agreement lays down the responsibilities of each group and stipulates the condition in which the vessel is to be maintained.

There are three main types of charters – voyage charter, time charter, and demise charter.

The demise charter is often known as a bareboat charter, and grants ownership or possession of the vessel to the charterer subject to certain time-bound conditions.

Terms and Features of a Voyage Charter

A voyage charter is a type of charter in which a vessel is leased out for a particular voyage. The charter agreement lists the ports of call, destination, and restrictions on cargo, if any.

Most voyage charters are undertaken by charterers who have cargo that needs to be shipped. For this, they contact ship owners through brokers and arrange a ship for a particular voyage.

Payment of voyage charters can be done in two methods – on a per-ton basis, or on a lump-sum basis .

The per-ton basis involves paying the owner for every ton of cargo or freight transported on the vessel. This is preferred when the cargo tonnage is considerably lower than the gross maximum cargo tonnage of the vessel.

On the other hand, when a higher weight of the cargo is carried, it is advisable to pay on a lump-sum basis . The shipowner must ensure that the tonnage carried on board the vessel is within the acceptable limits of the ship. This includes checking the tonnage of on-deck cargo, and the various load lines of the vessel.

There are some important terms used in a contract agreement, that lays out the time-based rules to be followed for the duration of the contract.

Laytime refers to the time that a charterer is allowed to complete the loading and unloading process at a port of call. Since the owner pays duties and berthing charges at the port, they expect the charterer to hasten the process.

In case the charterer exceeds the laytime laid out in the contract, he is obliged to pay a penalty known as demurrage . This covers the extra costs incurred by the shipowner owing to the delay by the charterer.

On the other hand, if the ship is able to complete the loading and unloading operations before the stipulated time, the charterer can claim payment of a despatch from the owner. This is often seen as an incentive for charterers to complete the port operations as soon as possible.

In voyage chartering, the shipowner undertakes payment of fuel, operation, and employment-related costs. It is their responsibility to hire the officers and other crew members for the voyage either from a pool of individuals working for them, or using brokers as middlemen to source mariners and seafarers.

In addition, the owner must also pay costs such as berthing and loading operations. Any equipment used must also be paid for by the owners.

To recoup these costs, the owners charge a higher rate from the charterer. In general, charterers transporting a one-off consignment prefer voyage charters despite the high cost. This is because they are not tied down to the contract for a long period of time.

Simply put, a voyage charter involves a charterer hiring a vessel for the purpose of a single voyage, in which the route and ports have been pre-determined. The responsibility of duty and other payments along with recruitment is handled completely by the shipowner, while the cargo is the sole responsibility of the charterer.

Terms and Features of a Time Charter

A time charter is a time-bound agreement, as opposed to a voyage charter. The shipowner leases a vessel to a charterer for a fixed period of time, and they are free to sail to any port and transport any cargo, subject to legal regulations.

Although the charterer controls the ship, the maintenance of the vessel still falls under the purview of the owner. They are responsible for ensuring that the vessel meets internationally accepted maritime standards, throughout the course of the agreement. They regularly employ marine surveyors to prepare reports on the seaworthiness of the vessel and make repairs as and when required. The owner will face legal action in case the vessel is found to have some major problem.

The time charter agreement can span anywhere from a few days to a few years. This is a long-term agreement that works on a single rate of payment known as the freight rate.

Payment is to be remitted every quarter and does not fluctuate under ordinary circumstances.

In time chartering, the charterer is responsible for selecting a crew, paying charges that arise during the voyages, and arranging for provisions to ensure smooth operations at every port of call. They must intimate the planned route to the owners in advance. The payment is calculated on a per-day basis, with penalties added at a later time. The cost of fuel, provisions etc. are to be covered by the charterer, while the owner will handle all maintenance-related costs.

The charterer often does not sail on the vessel and provide instructions to the master of the vessel in their stead. This includes permissible cargo, route and ports, required charter speed etc.

Unlike voyage charters that use a rigid payment calculation, there are several provisions for unforeseen delays in time charters.

Since payment is on a daily basis, the charterer may be delayed for a certain reason, and these are covered in the agreement.

Time not included in the final payment is known as off-hire hours . For instance, if a vessel is slowed down because of poor weather that could not have been predicted, the extra time spent is not included in the final time count.

Similarly, if some form of damage occurs and repairs need to be carried out, the duration is considered to be off-hire . Certain clauses can be inserted in the agreement, that allows for a fixed number of off-hire hours. Beyond this, the charterer is charged for delays.

Briefly put, a time charter involves leasing a vessel for a fixed period, on a per-day rate, where the charterer is free to use the vessel. The owner only looks after maintenance-related cost.

Clauses are inserted to protect the charterer from having to pay for hours that were spent due to events that could not have been foreseen.

How to Choose a Charter Type

Voyage and time charters are very different, in their intended use and service conditions. Knowing when to choose each type of charter can go a long way in meeting expectations of the charterer and shipowner.

A voyage charter is preferred in cases where the charterer only needs the vessel for specific voyages that may arise for different reasons. This could be the case when there is an occasional cargo to transfer.

An occasional cargo commonly springs up during sudden surges in demand, when the supply services are down. Thus, companies that may deal in other commodities may enter the cargo industry for that period of time, in order to make a profit.

This can also happen when the charterer has already pressed into service their own fleet of vessels, which forces them to hire a ship from a third party so that they may undertake a single voyage.

Voyage chartering can be tricky for inexperienced charterers, since the matter of the crew and equipment must be handled correctly.

Most owners make arrangements to look after these requirements, but it is mostly based on goodwill. Having a shipbroker negotiate the terms can be very helpful in ensuring that the occasional charterer is not inconvenienced by having a ship without a crew to man it.

A time charter is more commonly used by more experienced chartering firms when there is a long-term requirement for a vessel. Instead of having to specify the ports and routes undertaken by the vessel in the charter agreement, the charterer simply hires the boat for a fixed period of time and takes complete control over the vessel in all but name.

As they are free to sail to any destination with any group of crew and officers, it is beneficial to companies that already deal in shipping. For instance, if a ship is decommissioned or is sent in for repairs, the company needs to be able to procure a vessel for the duration of that period.

Instead of having to book a ship every time they wish to undertake a voyage, they use time charters. Thus, for the duration of the agreement, they will have possession of the vessel and are free to use it, within the purview of the law. This is especially useful since such a charterer will often already have a crew ready to take over the hired vessel.

Another major factor that sways the decision to pick either a voyage or time charter is the finances of the shipping industry. Voyage chartering is considered to be a volatile market since there is no assurance of leasing a boat on completion of an existing contract. Since it is only applicable for a single voyage, the overall volatility of the voyage charter is high.

However, charterers prefer voyage charters for the reason that they can always get a more competent rate from other ship owners. In other words, the owners are at the mercy of the chartering sector.

So, most ship owners prefer time charters, as it guarantees financial returns for a fixed period of time, at a fixed rate. This offers some protection against rapid fluctuation of the chartering rates. However, charterers do not prefer this contract, as it ties them down at a single rate for an extended period.

A one-off charterer always goes for a voyage charter, while a regular charterer prefers time charters. Shipowners are often directly approached by charterers, instead of having marine brokers. Thus, one must have an overall look at various factors influencing the shipping sector, prior to choosing between a voyage and time charter.

Overall Comparison

Table of responsibilities.

You may also like to read –

• 8 Main Factors that Affect Ocean Freight Rates
• What is the Difference between Lay days and Lay time?

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About Author

Ajay Menon is a graduate of the Indian Institute of Technology, Kharagpur, with an integrated major in Ocean Engineering and Naval Architecture. Besides writing, he balances chess and works out tunes on his keyboard during his free time.

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Time charter and voyage charter: general guide

This is an introductory article on time charters and voyage charters.

There are three main types of charters in shipping:

Voyage charter

• Time charter.
• Bareboat charter (demise charter).

Charters are often compared to taxis because it is the most straightforward analogy to understand.

Let’s begin with an example:

Sergey orders an Uber to get to work. Sergei pays the price based on distance and traffic jams. He does not pay for gas and does not pay the driver’s wage. If the car waits longer than 3 minutes for Sergey, he pays for the wait time. If the driver breaks the traffic rules, Sergey will not be held responsible (but his boss can reprimand him for being late).

Let’s consider this example in the context of a voyage charter:

Poseidon chartered a vessel to carry 15,000 tons of wheat from Varna to Barcelona. The freight rate is $30 per tonne. The loading and unloading rate is 5,000 tons per working day. The demurrage rate is $2,000 per day.

Now let’s break down the example into components:

• Port of loading and discharge. A charterparty may indicate more than one port.
• The charge for the carriage is the freight. Freight is often calculated per tonne of cargo, although it can also be fixed.
• Time for loading and discharge – laytime. Usually stated as a loading/unloading rate per day.
• Wait time – demurrage.

The shipowner is responsible for the actions of the master and crew. The shipowner may not only be the registered owner of the vessel but also, for example, the time charterer or bareboat charterer.

In a voyage charter, the shipowner pays for bunker, master and crew wages, port charges, and other expenses related to the vessel. These costs are included in the freight rate. The shipowner also bears the cost of repairs to the vessel.

The primary responsibility of the charterer under a voyage charter is to provide the cargo and pay the freight. The shipowner takes care of everything else.

Time charter

A time charter is a car hire with a driver. Back to Sergey:

Sergey went on a business trip to London for a fortnight. He has no time to explore the city, so he has rented a car with a driver. Sergey pays by the day, regardless of the frequency and length of his trips. He also pays for petrol and paid parking. Sergey does not pay the driver’s wage and does not pay traffic fines.

In a time charter, the vessel is not chartered to carry specific cargo from point “A” to point “B”. It’s chartered for a specific period of time. The shipowner provides and pays for the master and crew, as well as the insurance costs for the vessel. As with a voyage charter, the shipowner is responsible for their actions.

A time charterer has more responsibility:

• Instead of the freight for the carriage, the charterer pays hire, a fixed fee for the use of the vessel. As a rule, hire is paid monthly or semi-monthly.
• The charterer pays for bunker, port charges, loading and unloading costs, agency services, etc.

There is no laytime and demurrage in a time charter, as the charterer uses the vessel at his own discretion.

Main terms of a voyage charter and a time charter

There are two types of terms in a charterparty: implied and express. Implied terms automatically apply to all charterparties as a matter of fact or law, even if they are not mentioned in the charter. The express terms are the terms of the charterparty.

Implied terms

There are five main implied terms:

• The shipowner shall provide a seaworthy vessel at the commencement of the voyage.
• The vessel shall proceed with reasonable despatch.
• There should be no unjustifiable deviation.
• Not to ship dangerous goods without notice.
• To nominate safe ports of loading and discharge.

This list is not exhaustive.

Time charter terms

Main terms of a time charter:

• Period of hire
• Trading limits – the geographical limitations in which the charterer is allowed to use the vessel.
• Provisions for the place and manner of delivery of the vessel to the charterer and redelivery to the shipowner
• Laydays/Cancelling – charterer’s ability to terminate the charter if the vessel is not delivered by the agreed date
• Hire rate and payment procedure
• Off-hire – cases where the charterer does not pay the hire because the vessel cannot be used (e.g. due to a breakdown)
• Quantity and payment of bunker fuel
• Cargo allowed for carriage
• Excluded cargo – cargo that the shipowner prohibits carrying on the vessel
• Speed and bunker consumption
• Provisions on the allocation of liability between the charterer and shipowner

Bareboat charter

This article does not cover bareboat (demise) charters, but getting back to Sergey, a bareboat charter is a hire car without a driver. You can read more about bareboat charters here .

English solicitor. I assist in winning court cases and arbitrations in London. My specialization includes Gafta and FOSFA arbitrations, as well as maritime law (shipping).

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Voyage Charter vs Time Charter – Everything You Need to Know

Voyage Charter vs Time Charter – Everything you need to know.

One of the biggest questions facing a charterer is whether to opt for a voyage charter or a time charter. Evaluating voyage charter vs time charter can be a complex process, but we’ve broken everything down on this page, making it easier for charterers to decide which type of vessel chartering is best for them.

1. What is a Charter? 2. What is a Voyage Charter? 3. Voyage Charter Features/Terms 4. Voyage Charter Pros & Cons 5. What is a Time Charter? 6. Time Charter Features/Terms 7. Time Charter Pros & Cons 8. How to Choose a Charter Type 9. Charter Cost 10. Ongoing Cost 11. Flexibility 12. Contract Length 13. Convenience 14. FAQs About Voyage Charter and Time Charter 15. Conclusion

What is a Charter?

A voyage charter and a time charter are two options commonly found in the chartering business. A voyage charter is when the charterer leases a vessel for a specific voyage, such as Dubai to Singapore, while a time charter is a type of lease that allows the charterer use of the vessel for a specific period of time.

As you might imagine, there are many differences between these two types of charters, and both vessel chartering options have their own pros and cons. Keep on reading this page about voyage charter vs time charter to find out which of the two options will be most suitable for your ship chartering requirements.

Voyage Charter

What is a voyage charter.

A voyage charter is a type of ship chartering that sees the charterer agree to lease the vessel for one specific voyage. So, for example, the agreement might be for the charterer to gain use of the charter ship for a journey from Dubai to Dover.

Features/Terms

As just mentioned, a voyage charter is when a charterer leases a vessel for one voyage. Before the charter contract is signed, the parties will agree on the end destination, any ports of call, and whether there will be any restrictions on cargo. Once signed, the charterer must not deviate from any of these agreements.

The terms and conditions of the charter agreement will also stipulate the laytime permitted. The laytime refers to the amount of time it takes for the vessel to be loaded and unloaded. As the ship owner pays for all costs at the port, they need this process to be as quick as possible. If the charterer exceeds the agreed time, they must pay demurrage to the ship owner. Conversely, the ship owner will usually refund some money if the loading and unloading is quicker than stipulated.

But who is responsible for what costs? Well, with a voyage charter, nearly all costs are covered by the ship owner. These include costs relating to staffing, berthing, loading, unloading, and fuel. They cover these costs by charging the charterer a fee for leasing the vessel.

The amount of money paid by the charterer can be determined in two ways. The most common way to pay is on a per-ton basis. As the name implies, this sees the charterer paying a set price for every ton of cargo they transport. This is preferred by charterers when the amount of cargo they’re transporting is significantly less than the vessel’s gross maximum cargo tonnage.

The other payment type is a lump sum – one payment that allows the charterer to transport as much cargo as they want to. It is the ship owner’s responsibility to ensure the cargo weight does not exceed the gross maximum tonnage of the vessel. This type of payment is preferred by charterers when they’re carrying a higher weight of cargo.

This type of vessel chartering is generally preferred by charterers. This is because it often has more competitive prices, plus they are not tied down to any long-term commitments.

Pros & Cons

Pro: Charterer not liable for any costs, except initial charter fee Pro: Incentives to complete port operations quickly Pro: No need to find a crew Pro: No long-term contract

Con: Lack of flexibility for charterer Con: Higher initial charter fee

Time Charter

What is a time charter.

A time charter is a type of vessel chartering that sees the charterer lease the ship for a set period of time. So, they might lease the ship for two months, during which time they have the flexibility to choose their own routes and destinations.

Before anything is signed, the ship owner and the charterer will agree the exact period of time the lease will run for. Unlike with voyage charters, the two parties will not need to agree on ports of call and destinations, as the charterer has complete discretion over this.

With a time charter, the ship owner does not cover all costs. Instead, the charterer must pay for fuel and supply costs, as well as the cost of cargo operations. However, the charterer won’t have to pay such a large charter fee, which balances things out somewhat. The owner is still required to pay for the crew and ongoing maintenance, and also must ensure the vessel meets all necessary maritime safety standards.

It is generally the case that the charterer will pay for hire in advance, on a per-day basis. Payment is not usually made in one lump sum, with the charterer instead paying the lease charge in set instalments, which are usually quarterly. It’s important to note that, should the ship be held up in unforeseen circumstances, such as inclement weather, the lost time – referred to as off-hire hours – will not usually be charged for, although if too many off-hire hours are accrued, the charterer might end up being liable.

Ship owners generally prefer their vessels to be leased on a time charter. This is because time charters guarantee income for a long period of time, giving the ship owner increased security.

Pro: Guarantees charterer access to a vessel Pro: Initial lease cost is lower Pro: More flexibility for the charterer

Con: Several ongoing costs to pay Con: Tied down to long-term contract

How to Choose a Charter Type

We’ve discussed voyage charter vs time charter above, looking at the various pros and cons of each. But which should you choose when looking to charter a ship?

Well, this really depends on your requirements. We’ve broken things down into five sections – charter cost, ongoing costs, flexibility, contract length, and convenience – and will let you know which of the ship chartering options is better for each one.

Charter Cost

When it comes to the initial cost of chartering a ship, it’s nearly always going to be cheaper to go with a time charter. This is because the ship owner will be more amenable to a lower price, as they know you’ll be hiring the vessel for longer. What’s more, you, and not the ship owner, will be expected to cover other costs, pushing the initial price down further.

So, if you’re looking for the lowest possible upfront cost, the best option is a time charter. However, remember that other costs will also need to be paid.

Ongoing cost

If you choose to take out a time charter, you will have to pay several costs, including fuel and supply costs. With voyage charters, the only significant cost payable is the initial charter – all other major expenses are covered by the ship owner.

Therefore, if you want the lowest possible ongoing costs, the clear winner is the voyage charter. However, the upfront cost will be more expensive than a time charter.

Flexibility

Those who sign up for a voyage charter are limited in their movements, as they will have already agreed a set route with the ship owners. Those who have taken a time charter have far more freedom, as they can choose where to go throughout their charter.

This clearly means that those looking for more flexibility should opt for a time charter, as there are no limitations on route, ports of call, and destinations.

Contract Length

With a time charter, you’re tied into a long contract, committing you to ongoing payments. Voyage charters, on the other hand, only last for the duration of the voyage, meaning voyage charters are generally much shorter than time charters.

This all means that those looking for the shortest contract should opt for a voyage charter. However, if you know you’ll constantly need an available vessel, the long contract of a time charter could be more suitable.

Convenience

There will be no need to hire and pay a crew when opting for either the time charter or the voyage charter. It’s only bareboat charters that require the charterer to hire and pay their own crew. However, the ongoing costs associated with time charters can be inconvenient.

Overall, voyage charters are the more convenient of the two options, as there’s no need to organise payment for such things as port costs and fuel. However, both options are generally far more convenient than a bareboat charter.

FAQs About Voyage Charter and Time Charter

What are BIMCO Sanctions Clause for Voyage Charter Parties 2020?

These are intended to help in two scenarios. Firstly, if one of the signatories of the agreement gets sanctioned, the other signatories will be able to end the contract and claim damages. Secondly, when the trade or activity is subject to or becomes subject to sanctions, the ship owners can refuse to perform their contracted duties.

What is the difference between bill of lading and charter party vs time and voyage charter?

A charter party is an agreement between charterer and ship owner to lease a ship. A bill of lading is an agreement that legally obligates the charterer to carry cargo that has been loaded aboard the ship.

A time charter is a type of vessel chartering whereby the ship owner leases the ship for a set length of time. A voyage charter is a type of vessel chartering whereby the ship owner leases the ship for the duration of a specific voyage.

What are the duties and responsibilities of the ship owner and charterer under a time charter and voyage charter party?

Under a voyage charter, the ship owner assumes almost all responsibility, including hiring and paying crew, and paying for all significant costs associated with the journey. The charterer simply has to pay the ship owner a fee to secure their vessel.

With time charters, ship owners must still hire and pay staff. However, most other significant costs associated with a voyage, such as fuel and port fees, must be paid by the charterer.

Why do ship owners prefer voyage charter over time charter?

Quite simply, they don’t. Ship owners usually prefer time charters, as they ensure that their ship is guaranteed to be chartered for a longer period, generating income throughout.

Voyage charters are short, meaning the ship owner must continually find new charterers to lease the vessel to – something that isn’t always possible. When a new charterer can’t be found, the ship owner loses money.

Please note that charterers are required to take out insurance for both types of charter, to cover them against damage, injury, marine salvage , and more.

Those looking for short-term charters are best served by opting for a voyage charter, as these don’t require a long contract to be signed. They do have a higher initial cost, but this is offset by the fact that no other significant fees need to be paid.

However, those who know they’ll regularly require the use of a vessel might be better off with a time charter, as these see vessels leased for a long period of time. During this time, the vessel can be used to travel anywhere, without restriction. Time charters cost less upfront, but require the charterer to pay various other costs, such as the cost of fuel and port fees.

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How to choose a charter type

There are several different charter types which shipowners and charterers can use for the purposes of maritime trade. These include voyage charters, time charters and bareboat charters. When the parties are looking to choose a charter type, it is important they consider their specific needs, such as the type of cargo, frequency of shipments, need for cost predictability, need for flexibility, tolerance for risk and any other preferences they may have. In this guide, we look at what voyage charters and time charters are, focusing on the advantages and disadvantages of both.

What is a charter?

In shipping, a charter is the name given to the contract / agreement between a shipowner (who owns the vessel) and a charterer (who hires the vessel) regarding the use of that vessel for a specific time period or specific voyage. The specific details of the charter are negotiated, then set out in a formal charter party agreement. This legally binding contract outlines the terms and conditions of the charter as well as the rights and responsibilities of both parties (e.g. duration of the charter, freight rates or hire rates, the ports of loading and discharge).

What is a voyage charter?  

In shipping, a voyage charter describes an agreement to hire a vessel for a specific voyage or round-trip between specified ports. The one-off nature of voyage charters means they are commonly used for one-time shipments and occasional shipping requirements. For example, an oil company taking advantage of an unexpected crash in oil prices may decide to buy more stock than usual and choose a one-off voyage charter for a deep-sea tanker to transport the crude oil from Ras Tanura port in Saudi Arabia to Corpus Christi port in Texas, United States.

A voyage charter is agreed between a shipowner (who provides the vessel) and a charterer (who pays to transport goods). The charterer pays either a lump-sum or quantity-based freight rate to transport the cargo for the specific voyage, as well as the cost of loading and unloading the goods.

Advantages and disadvantages of voyage charters

Voyage charters have both pros and cons. Let’s look at some of the advantages and disadvantages of voyage charters for both the charterer and the shipowner.

Advantages of a voyage charter include:

• Flexibility Charterers can decide how much cargo is loaded on each voyage, as well as the route taken according to the market conditions at the time.
• Better cost management Charterers pay a lump-sum or quantity-based freight rate for each voyage. This gives them better control over their costs, which is particularly useful in volatile market conditions.
• Limited duration Voyage charters, used for one-time or ad hoc shipping requirements, allow charterers to adapt to changing business circumstances more easily as there is no long-term commitment.
• Ability to capitalise on market opportunities During high demand periods, shipowners can set higher freight rates to maximise their profits.
• No maintenance costs for the charterer The shipowner is responsible for the vessel's maintenance and operating expenses.

Disadvantages of a voyage charter include:

• Cost uncertainty The charterer could face unforeseen expenses linked to vessel loading, unloading, and other port activities.
• Risk exposure for charterers Unexpected events can result in additional costs for the charterer who, under a voyage charter, is responsible for navigation risks, delays, and market fluctuations.
• Lack of stability By their very nature, voyage charters are short-term agreements. This can make it hard to plan logistics for charterers with regular, predictable shipping requirements.
• Fluctuating freight rates During periods of increased demand, charterers may find freight rates for voyage charters are higher than time charters because they offer more flexibility.
• Less control for the charterer As the shipowner maintains operational control of the vessel, the charterer has limited control over its schedule and operations.
• Potential for disputes The flexible nature of voyage charters can make disputes over delays, cargo damage, or unexpected costs more likely.

What is a time charter?   

In shipping, a time charter is an agreement to hire a vessel and its crew for a specified period of time, usually a set number of months or years. During this period, the charterer has more control over the ship, including choosing its schedule, route and cargo handling procedures. These features make time charters most suitable for businesses which ship cargo on a consistent and regular basis. Under a time charter, the cost of using the vessel is either a fixed amount or a hire rate, which is typically calculated on a daily basis. For example, a gas company may use a time charter to hire a LNG carrier to regularly ship gas from Qatar to Japan.

Advantages and disadvantages of time charters

Time charters come with both advantages and disadvantages, which must be carefully considered..

Advantages of a time charter include:

• Ability to plan The fixed duration of time charters offers a predictability which enables both shipowners and charterers to better plan their logistics and transportation requirements.
• More financially certain The fixed or daily hire rate during the charter period makes budgeting and financial planning easier for charterers.
• Operational control The charterer is able to determine the routes, ports of call, and cargo handling procedures, giving them more control over the vessel's operations.
• Flexibility in cargo handling Charterers can be more responsive to changes in demand and/or the supply chain as they have the flexibility to load and unload different types of cargo at various ports.
• Lower financial risk for the charterer The shipowner assumes full responsibility for the vessel's maintenance and operating costs during the charter period.
• Reliability Time charters tend to be for longer periods of time and so are well-suited for businesses with regular, ongoing shipping needs.
• Avoidance of market fluctuations The agreed-upon rate remains constant for the full duration of the charter, thereby shielding the charterer from rate increases during peak season.

Disadvantages of a time charter include:

• Less flexibility The charterer is committed to the vessel for the agreed-upon period of time, limiting their ability to adapt to changing market conditions.
• Unused capacity costs The charterer may still have to pay the agreed hire rate, even if they don’t use the vessel’s full capacity due to falling demand.
• Port costs In most cases, the charterer is responsible for all port-related expenses, including vessel loading and unloading.
• Shared risks Under a time charter, the shipowner is liable for vessel maintenance while the charterer takes responsibility for operational risks (e.g. delays and disruptions).
• Potential for disputes Differences in expectations regarding vessel utilisation could result in disagreements between the shipowner and the charterer.
• Affected by long-term market trends Charterers may be locked into a higher hire rate, even if the market goes through a downturn.

How Clarksons can help

At Clarksons, we understand the market dynamics of shipping and recognise the unique challenges businesses face in navigating the complex waters of global maritime trade. Whether you are looking for assistance with a voyage charter for a one-time shipment, or a time charter for a longer-term arrangement, our specialist Chartering team provides market-leading support. Plus, thanks to our extensive global network and up-to-the-minute intelligence, we are able to provide comprehensive shipping consulting and advisory services that take into account both regional nuances and the latest market trends.

Difference Between Time Charter & Voyage Charter Cost

Many individuals own ships, boats, and other recreational vessels, often purchased as assets. They do not use these ships for shipping goods or ferrying passengers.

Instead, they often lend them out to third-party organizations that use them for various purposes. In maritime legal language, this lending method is known as chartering.  Chartering  is an important concept in the international maritime trade sector and has different types.

This article will examine the differences between two specific categories of charters: the journey charter and the time charter .

What is a Charter?

A charter is an agreement between two or several groups, known as charter parties, regarding leasing a vessel for a fixed set of conditions. The terms and rules stipulated in the charter are binding on all various parties in the agreement and cover various clauses and possible scenarios that may arise. It is considered an official document in legal things and is required by Admiralty Law to be made up in case of any vessel hiring or leasing.

The charterer may have cargo that he demands to transport or may lease the vessel to third parties.

The  shipbroker  links ship owners and charterers and aids in finalizing the agreement’s terms. These terms include the duration of leasing, fees, payment installments, regulations on usage, and detailed surveyor reports on the ship’s condition.

Payment is a freight rate and is remitted to the owner of the vessel at fixed intervals set in the agreement.

Surveyor reports are crucial in chartering, as they ensure that the vessel is seaworthy before being chartered. Similarly, after a charter agreement is completed and before final payout formalities, another survey report is conducted to make sure that the vessel has sustained no damage inside the lease period.

The charter agreement outlines each group’s responsibilities and stipulates the conditions under which the vessel will be maintained.

There are several main types of charters – voyage charter, time-based, and demise charter.

The demise charter, often known as a bareboat charter, grants the charterer ownership or possession of the vessel subject to certain time-bound conditions.

Terms and Features of a Voyage Charter

A voyage charter is one in which a vessel is leased out for a given voyage. The charter agreement notes the ports of call, destination, and cargo restrictions, if any.

Most voyage charters are undertaken by charterers with cargo that must be shipped. They contact ship owners through brokers and manage a ship for a particular voyage.

Voyage charters can be paid in two ways – on a per-ton basis or a lump-sum basis .

The per-ton basis  is about paying the owner for each ton of cargo or freight transported on the ship. This is desired when the cargo tonnage is considerably less than the gross maximum cargo tons of the vessel.

On the other hand, when a higher cargo weight is carried, paying on  a lump-sum basis is advisable. The shipowner must ensure that the cargo carried on board the vessel is inside the acceptable limits of the ship.

Contracts Are Critical

A contract agreement uses some important terms, laying out the time-based rules to be observed for the duration of the contract.

Layover  refers to the time a charterer can complete the loading and unloading process at a port of choice. Since the owner pays duties and berthing costs at the port, they believe the charterer to hasten the process.

If the charterer exceeds the laytime set out in the contract, he is obliged to fork over a penalty known as  demurrage . This handles the extra costs incurred by the shipowner due to the charterer’s delay.

On the other hand, if the ship can complete the loading and unloading operations before the given time, the charterer can pay the owner for a despatch.

The shipowner pays fuel, operation, and employment-related costs in voyage chartering. They are responsible for hiring the officers and other crew members for the voyage from a pool of individuals working for them or having brokers as middlemen to source mariners also seafarers.

Owner Pays for Berthing and Loading

To recoup these costs, all owners charge a higher rate than the charterer. Charterers transporting a one-off material prefer voyage charters despite the high cost because they are kept from the contract for a long period.

Simply put, a regular charter involves a charterer getting a vessel for a single voyage, in which the route and places have been pre-determined. The shipowner handles duty and other payments along with recruitment, while the cargo is the sole responsibility of the charterer.

Terms and Features of a Time Charter

A time charter is a time-bound agreement, unlike a voyage charter. The shipowner gets a vessel to a charterer for a given period, and they are free to sail to any port and move any cargo, subject to legal regulations.

Even though the charterer controls the ship, the vessel’s maintenance still falls under the owner’s purview. The owner is responsible for making sure the vessel meets internationally accepted business standards throughout the agreement. An owner regularly employs marine surveyors to prepare reports on the vessel’s seaworthiness and make repairs as and when required. The owner will face legal action if the vessel is found to have a major problem.

The time charter contract can span anywhere from a couple of days to a few years. This is a long-term agreement which works on a single rate of payment called the freight rate.

Payment Must Be Remitted Every Quarter

They must inform the owners of the planned route in advance. The payment is calculated on a daily basis, with penalties added later. The charterer will cover the cost of fuel, provisions, etc., while the owner will handle all maintenance-related expenses.

The charterer often does not sail on the vessel and instructs the master in their stead. This includes permissible cargo, routes and ports, required charter speed, etc.

Unlike voyage charters that utilize a rigid payment calculation, there are several provisions for unpredictable delays in time charters.

Since payment is made daily, the charterer may be delayed for certain reasons covered in the agreement.

Briefly, a time charter involves leasing a ship for a fixed period on a per-day rate. The charterer can use the vessel, and the owner only handles maintenance-related costs.

Clauses are inserted to defend the charterer from paying for hours spent due to events that could not have been foreseen.

How to Choose a Charter Type ?

Voyage and time charters differ in their intended use and service conditions. Knowing when to choose each kind of charter can go a long way toward meeting the expectations of the charterer and shipowner.

A voyage charter is preferred when the charterer only requires the vessel for specific voyages that may be because different reasons. This could be the case when there is occasional cargo to transfer.

This can also happen when the charterer has already put into service its fleet of vessels, which forces it to hire a ship from a third party so that it may undertake a single voyage.

Voyage chartering can be tricky for new charterers since the crew and equipment must be handled correctly.

Most owners arrange to look after these needs, but it is mostly based on goodwill. Having a shipbroker finalize the terms can be very helpful in making sure that the occasional charterer is not inconvenienced. This happens due to having a ship without a crew to operate it.

Experienced Firms Using Time Charter.

A time charter is more often used by more experienced chartering firms when a long-term vessel requirement exists.

Instead of booking a ship whenever they wish to undertake a journey, they use time charters. So, for the duration of the agreement, they will have possession of the ship. Charterers are free to use it within the purview of the law. This is especially useful since a charterer often has a crew ready to take over the hired vessel.

Most ship owners desire time charters, as they guarantee financial returns for a fixed period at a fixed rate. This offers some protection against rapid changes in chartering rates. However, charterers prefer something other than this contract because it ties them down at a single rate for an extended period.

Thus, various factors influencing the shipping sector must be considered before choosing between a voyage and a time charter.

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Voyage Charter: Freight and Lien

• First Online: 02 September 2021

Cite this chapter

• Arun Kasi 2  

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This chapter analyses freight and lien in voyage charterparties. The distinction between freight and hire is observed. The different bases of freight calculation such as on a lump sum, deadweight and quantity loaded or discharged are introduced.

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See Thomas v Harrowing Steamship Co [1913] 2 KB 171 (EW CA), speech of Kennedy LJ.

Shell International Petroleum Co Ltd v Seabridge Shipping (The Metula) [1978] 2 Lloyd’s Rep 5 (EW CA).

AIC Limited v Marine Pilot Limited (The Archimidis) [2008] EWCA Civ 175, [2008] 2 All ER (Comm) 545, [2008] 1 Lloyd’s Rep 597 (EW CA).

(1986) 2 Com Cas 55 (EW CA).

(1897) 2 Com Cas 84, 13 TLR 183 (EW HC).

Only then. In Ocean Projects Inc v Ultratech Pte Ltd [1994] 2 SLR 369 (SG CA), there was no contract between the disponent shipowner and the cargo interest, as the disponent shipowner carried the goods by an agreement between it and a freight forwarder. Hence, the shipowner was not able to claim quantum meruit freight from the cargo interest, when the freight forwarder went into liquidation and the freight was not paid. For more detailed facts of this case, see chapter 4.2.1.1 ‘Freight Forwarder’s Bill’/chapter 13.7.1.

Stevens v Bromley & Sons [1919] 2 KB 722, 88 LJKB 1147, 14 Asp MLC 455, 24 Com Cas 254, 121 LT 354, 35 TLR 594 (EW CA).

Batis Maritime Corporation v Petroleos Del Mediterraneo SA (The Batis) [1990] 1 Lloyd’s Rep 345 (EW HC).

Hopper v Burness (1876) 1 CPD 137, 45 LJQB 377, 3 Asp MLC 149 (EW HC); Hunter v Prinsep (1808) 10 East 378, 103 ER 818 (EW Court of King’s Bench): the question is if there was a ‘new bargain’.

See chapter 13.1.5.

Ellis Shipping Corporation v Voest Alpine Intertrading (The Lefthero) [1991] 2 Lloyd’s Rep 599 (EW HC).

[1916] 2 KB 624 at 627 (EW HC).

Brown v Gaudet (Cargo ex Argos) (1873) LR 5 PC 134, 42 LJ Adm 1, 1 Asp MLC 519, 21 WR 420, 28 LT 77, [1861–73] All ER Rep Ext 1057 (PC).

Black v Rose (1864) 2 Moo PCCNS 277, 10 Jur NS 1009, 2 Mar LC 89 (PC on appeal from Ceylon); Paynter v James (1867) LR 2 CP 348, 2 Mar LC 450 (EW Court of Common Pleas).

Ritchie v Atkinson (1808) 10 East 295, 103 ER 787 (EW Court of King’s Bench).

Asfar v Blundell [1896] 1 QB 123 (EW CA); Montedison SpA v Icroma SpA (The Caspian Sea) [1979] 3 All ER 378, [1980] 1 WLR 48, [1980] 1 Lloyd’s Rep 91 (EW HC).

Eg. China Offshore Oil (Singapore) International Pte Ltd v Giant Shipping Ltd (The Posidon) [2001] 1 Lloyd’s Rep 697 (EW HC); Pentonville Shipping Ltd v Transfield Shipping Inc (The Johnny K) [2006] EWHC 134 (Comm), [2006] 1 Lloyd’s Rep 666 (EW HC); AIC Limited v Marine Pilot Limited (The Archimidis) [2008] EWCA Civ 175, [2008] 2 All ER (Comm) 545, [2008] 1 Lloyd’s Rep 597 (EW CA).

These are examples only and charterparties may provide for the freight to be earned at other points of time.

(1854) 23 LJ Ex 169, 9 Exch 444, (1854) 156 ER 189 (EW Court of Exchequer Chamber).

[2016] EWHC 2223 (Comm) (EW HC).

Vagres Compania Maritima SA v Nissho-Iwai American Corporation (The Karin Vatis) [1988] 2 Lloyd’s Rep 330 (EW CA).

(1877) 25 WR 305 (EW HC).

Robinson v Knights (1873) LR 8 CP 465 (EW Court of Common Pleas).

See chapter 13.4.2.1.

[1891] 1 QB 742, 60 LJQB 621 (EW CA).

[1893] 2 QB 518, 63 LJQB 128, [1891–94] All ER Rep Ext 1551 (EW CA).

Compania Naviera General SA v Kerametal Ltd (The Lorna I) [1983] 1 Lloyd's Rep 373 (EW CA).

See Asfar v Blundell [1896] 1 QB 123 (EW CA).

See Allison v Bristol Marine Insurance Co (1876) 1 App Cas 209, 3 Asp MLC 178, [1874–80] All ER Rep 781 (UK HL).

Aries Tanker Corpn v Total Transport Ltd (The Aries) [1977] 1 All ER 398, [1977] 1 WLR 185, [1976] 2 Lloyd's Rep 256 (UK HL).

Dakin v Oxley (1864) 15 CBNS 646, 33 LJCP 115, (1864) 143 ER 938 (EW Court of Common Pleas); Henriksens Rederi A/S V Thz Rolimpex (The Brede) [1973] 2 Lloyd’s Rep 333 (EW CA). The rule was also in practice in Singapore, as seen from Skibs A/S Trolla And Skibs A/S Tautra v United Enterprises & Shipping (Pte) Ltd (The Tarva) [1973] 2 Lloyd’s Rep 385 (SG HC).

Colonial Bank v European Grain & Shipping Ltd (The Dominique) [1989] 1 Lloyd’s Rep 431 (UK HL).

See Great Indian Peninsula Rly v Turnbull (1885) 5 Asp MLC 465, Cab & El 595, 33 WR 874, 53 LT 325, 1 TLR 570 (EW HC).

Aries Tanker Corpn v Total Transport Ltd (The Aries) [1977] 1 All ER 398, [1977] 1 WLR 185 (UK HL).

Article III(6).

[1901] AC 462 (UK HL).

[1913] 2 KB 171 (EW CA), affirmed by the House of Lords in [1915] AC 58 (UK HL).

Skibs A/S Trolla And Skibs v United Enterprises & Shipping (Pte) Ltd (The Tarva) [1983] 2 Lloyd’s Rep 385 (SG HC).

See Hunter v Prinsep (1808) 10 East 378, 103 ER 818 (EW Court of King’s Bench).

(1868) 4 CP 138 (EW HC).

See Compania Naviera General SA v Kerametal Ltd (The Lorna I) [1983] 1 Lloyd's Rep 373 (EW CA).

[1896] 1 QB 123 (EW CA).

Montedison SpA v Icroma SpA (The Caspian Sea) [1979] 3 All ER 378, [1980] 1 WLR 48, [1980] 1 Lloyd’s Rep 91 (EW HC).

SS Athamas (Owners) v Dig Vijay Cement Co Ltd (The Athamas) [1963] 1 Lloyd's Rep 287, 107 Sol Jo 315 [1963] (EW CA).

(1877) 2 QBD 423 (EW CA).

Cf Dahl v Nelson, Donkin & Co (1881) 6 App Cas 38 at 44–45, 50 LJ Ch 411, [1881–85] All ER Rep 572 (UK HL), speech of Lord Blackburn.

The Galam (Cargo ex) (1863) Brown & Lush 167, 2 Moo PCCNS 216, (1863) 33 LJ Adm 91 (PC).

A bond by which cargo to be discharged is given in security for a loan.

This means the shipowner has two persons to hold liable for the freight, i.e. the charterer and the bill of lading holder.

‘Freight prepaid’ statement is more common with time charters than voyage charters.

Compania Comercial y Naviera San Martin SA v China National Foreign Trade Transportation Corporation (The Constanza M) (HC) [1980] 1 Lloyd's Rep 505 (EW HC).

[1905] 2 KB 92 (EW HC).

Tradigrain SA and Others v King Diamond Marine Ltd (The Spiros C) [2000] All ER (D) 979, [2000] 2 Lloyd's Rep 319 (EW CA).

Dommett v Beckford (1833) 5 B & Ad 521.

As thought in Ngo Chew Hong Edible Oil Pte Ltd v Scindia Steam Navigation Co Ltd (The Jalamohan) [1988] 1 Lloyd’s Rep 443 (EW HC).

India Steamship Co v Louis Dreyfus Sugar Ltd (The Indian Reliance) [1997] 1 Lloyd’s Rep 52 (EW HC).

[1997] 2 Lloyd’s Rep 641 (EW CA).

Oriental Maritime Pte Ltd v Ministry of Food, Government of the People's Republic of Bangladesh (The Silva Plana, Bahamastars and Magic Sky) [1989] 2 Lloyd's Rep 371 (EW HC).

See Sections 2(d) and 10 (para 1) of the Indian Contract Act 1872/Malaysian Contracts Act 1950.

Action SA v Britannic Shipping Corpn Ltd (The Aegis Britannic) [1987] 1 Lloyd's Rep 119 (EW CA).

As opposed to general lien. See chapter 13.4.3.

Cl. 21 of the ASBATANKVOY form states “the lien shall continue after delivery of the cargo”. However, the effectiveness of this clause is dubious as it may not be legally possible for the shipowner to have a lien when it has lost the possession.

Hingston v Wendt (1876) 1 QB 367 (EW HC).

See Kirchner v Venus (1859) 12 Moo PC 361, 14 ER 948. 7 WR 455, 5 Jur NS 395 (PC); Allison v Bristol Marine Insurance Co  (1876) 1 App Cas 209[1874–80] All ER Rep 781 (UK HL).

The Galam (Cargo ex) (1863) Brown & Lush 167, 2 Moo PCCNS 216, (1863) 33 LJ Adm 91 (PC). See chapter 13.4.3 for a detailed discussion of this case.

The Exeter Carrier Case (1743) 2 Ld Raym 867. Note the general rule that a lien at common law can only be created by the owner of the goods or by his express or implied authority: see Buxton v Baughan (1834) 6 C & P 674, 172 ER 1414 (EW Court of Exchequer); Pennington v Reliance Motors Ltd [1923] 1 KB 127 (EW HC). A bareboat charterer or a mortgagee in possession of the ship will usually have such authority to create lien at least in the ordinary course of trading: See Williams v Allsup (1861) 10 CB NS 417, 142 ER 514 (EW Court of Common Pleas): mortgagee of a ship may validly create a lien in favour of repairer for repairs performed to keep he seaworthy; see also Green v All Motors Ltd [1917] 1 KB 625 (EW CA); Ablemarle Supply Co Ltd v Hind [1928] 1 KB 307 (EW CA), involving repairers’ lien over car under hire-purchase against the financier-owner, held in favour of the repairer.

Miramar Maritime Corpn v Holborn Oil Trading Ltd (The Miramar) [1984] AC 676, [1984] 2 All ER 326, [1983] 2 Lloyd’s Rep 319 at 324 (EW HC).

Steelwood Carriers Inc of Monrovia, Liberia v Evimeria Cia Naviera SA of Panama (The Agios Giorgis) [1976] 2 Lloyd’s Rep 192 (EW HC). Cf Aegnoussiotis Shipping Corpn of Monrovia v A/S Kristian Jebsens Rederi of Bergen (The Aegnoussiotis) [1977] 1 Lloyd’s Rep 268 (EW HC).

Section 2(1) of the UK Carriage of Goods by Sea Act 1992/UK Bills of Lading Act 1855 (now repealed). See chapter 2.2.10.1.

[1994] 2 SLR 369 (SG CA).

In the USA.

In Malaysia.

Prior to making the final decision, the court made an interim order for release of the cargo to the respondents subject to the respondent furnishing a banker's guarantee for any lien claim.

I.e. Contract between the disponent shipowner and the freight forwarder.

Santiren Shipping Ltd v Unimarine SA (The Chrysovalandou Dyo) [1981] 1 All ER 340, [1981] 1 Lloyd’s Rep 159 (EW HC).

Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars) [2017] EWHC 2150 (Comm), [2017] 1 Lloyd’s Rep 409 (EW HC).

See Castleton Commodities Shipping Co Pte Ltd v Silver Rock Investments (The Clipper Monarch) [2015] EWHC 2584 (Comm), [2016] 1 Ll L Rep 1 (EW HC) for another instance of order for sale of cargo liened by the shipowner, where the ship was waiting outside the Chinese territorial waters with the liened cargo.

Feoso (Singapore) Pte Ltd v Faith Maritime Co Ltd (The Daphne L) [2003] SGCA 34 (SG CA).

As last amended in 2018.

See Arun Kasi, Arbitration : Stay of Court Proceedings and Anti-Suit Injunctions , Malaysia, CLJ Publication, 2014.

Section 10 of the Malaysian Arbitration Act 2005.

See Dainford Navigation Inc v PDVSA Petroleo SA (The Moscow Stars) [2017] EWHC 2150 (Comm), [2017] 1 Lloyd’s Rep 409 (EW HC).

(1858) El Bl & El 353, 120 ER 540 (EW Court of Exchequer Chamber), affirmed by the House of Lords in (1860) 8 HL Cas 338, [1843–60] All ER Rep 844 (UK HL).

Metall Market OOO v Vitorio Shipping Co Ltd (The Lehmann Timber) [2013] EWCA Civ 650, [2014] QB 760 (EW CA).

Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The Bulk Chile) [2013] EWCA Civ 184, [2013] 2 Lloyd’s Rep 38.

Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The Bulk Chile) [2013] EWCA Civ 184, [2013] 2 Lloyd’s Rep 38.

[1993] 1 SLR 980 (SG CA).

At the instance of an application by the shipowner for summary judgment.

Doctrine of privity of contract.

To whom no bill of lading has been issued by the shipowner, hence no contractual nexus between them.

Western Bulk Shipowning III A/S v Carbofer Maritime Trading ApS (The Western Moscow) [2012] EWHC 1224 (Comm), [2012] 2 All ER (Comm) 1140, [2012] 2 Lloyd’s Rep 163 (EW HC).

In England and Wales, under CPR 35. In Malaysia and Singapore, under Order 17 of the respective Rules of Court.

Itex Itagrani Export SA v Care Shipping Corp (The Cebu) (No. 2) [1990] 2 Lloyd’s Rep 316 (EW HC).

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Kasi, A. (2021). Voyage Charter: Freight and Lien. In: The Law of Carriage of Goods by Sea. Springer, Singapore. https://doi.org/10.1007/978-981-33-6793-7_13

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Time Charter Equivalent (TCE): Definition and How It's Calculated

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What Is Time Charter Equivalent (TCE)?

Time charter equivalent (TCE) is a shipping industry measure used to calculate the average daily revenue performance of a vessel. Time charter equivalent is calculated by taking voyage revenues, subtracting voyage expense, including canal, bunker and port costs, and then dividing the total by the round-trip voyage duration in days. It gives shipping companies a tool to measure period-to-period changes.

Key Takeaways

• Time charter equivalent (TCE) is a method for determining the net profit or loss of operating a vessel per day.
• Voyage expenses are mainly fuel and the costs related to maintaining the crew onboard in terms of salary but also food and quarter.
• Looking at TCE provides shipping companies a way to track period-by-period changes.

Understanding Time Charter Equivalent

The time charter equivalent is calculated as:

(Voyage Revenues - Voyage Expenses) Round Trip Duration in Days

It can also be calculated on a per-day basis based on period, spot and weighted average .

TCE revenue is used as a measure of performance to track performance from one period to another but it is a non-GAAP measure. Companies may still choose to report it in their financial statements as a footnote.

The TCE is used by cargo brokers in the shipping industry to present chartering opportunities to shipowners. Chartering opportunities differ widely in potential revenues and costs. The TCE is a way to describe these opportunities in a standardized way — essentially dollars per day — making comparisons easier for shipowners.

Why Per-Day Costs Matter

The single largest variable costs of a voyage are fuel and the cost related to crew upkeep, and this varies in direct relationship to the speed at which the voyage is performed. The speed of the laden part of the voyage is agreed with the charterer when the voyage charter is negotiated. The ship owner or, if there is one, the time charterer chooses the speed of the vessel for the ballast voyage (when the ship is empty of cargo) sailing the ship to a position where it can load a cargo for the voyage charter. In both cases the slower the ship, the lower the fuel cost as consumption will be lower and the faster the ship, then the higher the fuel consumption and therefore the cost.

The slower a ship sails, the longer the voyage (more days) but the less fuel it consumes. So the calculation of the TCE will be affected in two ways (as the Freight lump sum remains the same). The net freight will go up because of the savings made on the fuel but at the same time, it will be divided by more days taking the TCE down. Therefore a ship should only go slower if the cost of fuel, saved by slower sailing, offsets the reduction of the TCE caused by the increase in the number of days the voyage lasted. Finally, if the fuel cost saving justifies slower sailing then the owner will look to the lost opportunity of the days that could have been spent on the next voyage compared with the improvement in TCE from slower steaming on the current voyage. This is a very important point but the decision must be taken at the start of a voyage.

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A Ship on Time Charter : Here is All a Seafarer need to know

Most of the seafarers consider shipping business as a difficult subject.

Not that it is so much difficult. But because it is not something we deal with day in day out.

We know how much we need to know to get the days to go on.

And this was perfectly Ok until a few years back.

But now, each minute matters and each hour of off-hire need explaining.

That makes it so much important for we seafarers to understand shipping business.

Today in this blog, we will discuss about time charter and what seafarers need to be aware of when the vessel is under a time charter.

Ship Charter

Shipowner buys a ship to earn a hire by letting someone (the shipper) use the space on their ship to carry cargo from one place to other.

In the ideal world, the shipper has the cargo and should directly contact a shipowner for transporting their cargo.

In the real world, it is difficult.

When we need to buy land, it is difficult to find a direct seller. Same goes for the seller for whom it is difficult to find a direct buyer.

We approach a property dealer who has a number of sellers as well as buyers for different properties.

Middleman is required quickly and easily find what we need.

In the shipping business, that middleman is called “Charterer”.

Of course, charterer does not just make the shipper meet shipowners.

In fact, they themselves hire the ship and arranges to fill the space of the ship with cargoes from one or many shippers.

And if a shipper manages to find a ship on its own then the shipper becomes the charterer too.

Different types of ship chartering

Irrespective of who the charterer is, there are different ways a ship can be hired.

• The ship can be hired for one voyage
• The ship can be hired for a particular time
• The ship can be owned for a particular time period

Every stakeholder has different responsibilities under each type of charter. Let us discuss each type of charter.

Time charter

Under a time charter, the charterer hires the vessel for a particular period of time.

The time could be in years, days or months.

The shipowner receives the freight on per day basis which is settled every month or every quarter.

The time charter can be compared with the hiring a cab on per hour basis.

In this type of charter…

• The fuel cost is borne by the charterer
• The ship is managed by the shipowner
• The maintenance of the ship is shipowner’s responsibility
• The crew costs are paid by the shipowner
• Port dues are paid by the charterer
• Agents at ports are appointed by the charterer

Time charter party agreement

Similar to the voyage charter party agreement, for time charter the shipowner and charterer would have a time charter party agreement.

In most of the case, this time charter party agreement would be provided to the ship.

In the agreement copy provided to the ship, the figures and data like freight rate, etc may have been deleted to maintain confidentiality.

Alternatively, the ship may be provided with a different document which may be called “Charterer’s instructions to Master”.

The master must read these instructions carefully and highlight the key instructions for follow up.

At the minimum, the key instructions to look for are…

• The charter party speed as per time charter party agreement.
• Instructions for notification in case of ship-shore cargo discrepancy
• percentage of ship-shore cargo figure discrepancy allowed
• Instructions for notifications in case of an incident

Under a voyage charter, the vessel has been hired for the voyage.

The charterer would not be concerned about any delay because of the vessel as it is the vessel and shipowner that would lose that time.

Consider the case of hiring an Uber.

If you have hired the cab at a pre-agreed rate, you would not be so much worried about the time the cab takes to reach the destination.

But what if you have hired the cab on per hour basis?

You do not want the cab to stop in between unnecessarily.

Same goes for the time charter.

The charterer is paying the shipowner per day basis (pro-rata) and any delay by the ship is a loss for the charterer.

This loss of time because of the ship is called “off-hire”. This is the time for which the vessel is not on hire and so the name “off-hire”.

The off-hire time would be for

• any deviation from the original track (For example for a crew change, picking up stores or for some repairs, etc)
• Any stoppages at sea (For example for machinery breakdown etc)
• Cargo tanks failed by the cargo surveyor and declared not fit for loading

Our responsibility as seafarers is to keep the off-hires to as close as possible to the zero hours.

For any off-hire, the vessel needs to send the off-hire report which lists the total off-hire time and fuel consumed during this off-hire time.

Sometimes time charter party agreement may allow certain hours of off-hour per instance which will not be charged to the shipowner.

For example, it could be something like this in a time charter party agreement…

If the owners manage to keep the off-hire time for one instance to less than 3 hours, this would not count as off-hire and no reimbursement need to be paid to the charterers by the shipowner…

For example, if the cargo tanks were failed by the cargo surveyor and after corrective action by the ship staff if the tanks were passed within 3 hours then there would not be any off-hire.

In any case, the master needs to create an off-hire report for all the off-hires and send it to the shipowner/ship manager for approval.

Ship managers would then forward (or ask the master o forward) the off-hire report to the charterers.

Speed of the ship

If you hire a cab on per hour basis, you would not expect it to move slowly.

If it does, you would end up paying more money as it would take more time to reach the destination.

Similarly, under time charter, the charterer would want the ship to run at speed declared by the shipowner or agreed in the charter party agreement.

It is the master’s responsibility to ensure that the ship always maintains that speed.

But what if the vessel is experiencing rough weather and master is not able to maintain the charter party speed?

The time charter party also have clauses for the weather conditions.

So say, the vessel is required to maintain 13 knots of speed when the wind speed is less than BF 6.

If the wind force is 6 or more, the speed for that period will not count as under-performance of the ship.

This makes it so much important to note down the weather conditions correctly in the deck log book as well as in the noon report.

At the end of an agreed period (each voyage, quarter, half yearly or yearly as agreed in charter party agreement) the performance of the vessel with respect to speed will be analyzed.

Under a time charter, the fuel costs are covered and paid by the charterer.

The fuel supply is arranged by the charterer.

When the ship is delivered to the charter, charterer/shipowner may carry out fuel oil survey to get the actual fuel oil onboard at the time of delivery of the vessel to the charterer.

This would be the fuel that shipowner has delivered to the charterers at the time of delivery of the ship.

When the charterer hands over the vessel back to the shipowner, the bunker survey is again carried out.

This will the fuel handed over by the charterer back to the shipowner.

So let us say that

• Bunkers at the time of delivery were HFO: 400MT and DO: 100 MT
• Bunkers at the time of re-delivery were HFO: 250MT and DO: 50 MT

In this case, charterer needs to pay the shipowner for 150MT of HO and 50MT of DO.

It would be another way around if the bunkers at the time of redelivery are more than the bunker that was handed over to the charterers at the time of vessel delivery.

Agents at load port and discharge port

When the vessel is under time charter, the agent at load port and discharge port would be appointed by the charterers.

Shipowner or manager would have no role and relation with the agents.

It is important for the master and ship staff to be aware of this.

Usually, the agents are there to help ship staff but if the vessel is on time charter, we need to be more cautious while handling with an agent.

In a time charter, the loyalty of the agents lie with the charterer and not with the ship staff or shipowners.

Masters must be aware that as the agent is being paid by the charterer and not the shipowner, they may not go out of their way to help the vessel.

This is particularly important in matters that lie under the responsibility of the ship staff, shipowners or managers.

For example, if the ship is detained by the PSC for some reasons, the agent may not be that enthusiastic to clear the vessel at the earliest as in this case the vessel will be off-hired and the agent’s employer (charterer) would not be loosing on anything.

This may not be the case with some professional agencies but nevertheless, masters need to be aware of this.

Cargo under-performance

Under the time charter, the charterer may claim for under-performance of the vessel and seek compensation from the shipowner for loss in time.

The under-performance could be

• Delays in starting the cargo operation
• Loading of the cargo at less loading rate
• Discharging of the cargo at less discharge rate
• Stoppages during cargo operations from the ship staff

If the under-performance claim is justified and valid, then there is not much we can do.

But there would be occasions when it would actually be the delay from the shore and which is being claimed to be ship delay.

That makes it important to accurately issue these two documents

• Statement of facts
• Letter of protest for any delays

Apart from that accurately recording all the timings in the port log is important to support SOF and letter of protest.

For tankers, if any restrictions are put by the loading master on the vessel’s capability to load or discharge, a protest must be issued on this.

The restriction could be

• to maintain manifold pressure lesser than the vessel is capable to maintain
• to discharge (or load) at a rate lesser than vessel can load
• shore provided a number of hoses lesser than vessel can connect

The letter of protest would help the ship staff and shipowner to prove that vessel under-performed because of the shore side restrictions.

The time charter agreement (or the instructions to master) provided onboard may have the minimum loading or discharge rate vessel need to maintain.

This could be something like

Owners warrants that vessel can discharge at a rate of 500 m3/Hr and maintain 7 bars at the manifold in all conditions…

While the vessel needs to make sure that they comply with this but they must not over-rely on these instructions.

For example, at a discharge port vessel achieved discharge rate of 800 m3/Hr.

This does not mean that there is no need to issue a letter of protest for any restrictions from the shore side.

Unclear, unreasonable and unsafe instructions

While on time charter, the charterer may ask the master to perform some tasks which may be unsafe or is not as per the industry guidelines.

I will list here two of such instructions that I personally came across.

• Charterers asked to load a heated cargo adjacent to a cargo which is heat sensitive.
• Charterers asked to keep the original bill of lading on board during the voyage from load port to discharge port

You may come across other such requests. The master needs to decline these requests.

If at all required, Master need to oblige to the requests only when

• The charterer has provided a “letter of indemnity (LOI)” to the ship owners or managers
• Instructions have been received from the shipowner or manager to oblige the request
• It is safe to do so

From a commercial point of view, it is Master and ship staff’s moral responsibility to ensure that shipowner profits from owning and running the ships.

But there are no hard and fast written rules that hold good in all situations.

This is particularly the case when a ship is chartered in different ways.

It is important that we understand our responsibilities under each charter party.

And it is important that we understand where the loyalties of each party that we are interacting with lies.

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About Capt Rajeev Jassal

Capt. Rajeev Jassal has sailed for over 24 years mainly on crude oil, product and chemical tankers. He holds MBA in shipping & Logistics degree from London. He has done extensive research on quantitatively measuring Safety culture onboard and safety climate ashore which he believes is the most important element for safer shipping.

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56 comments.

Now this Topic is crystal clear for me Thank you very much sir I found All of your blogs are really helpful I am appearing for meo class 1 from mumbai You are doing a great job sir

Glad you liked it Girish... Feels great hearing that.

Great sir!! Expecting more frequent blogs from you.May be fortnightly. If its ok fr you

Thanks, Lovika. I will try to be more frequent in posting new articles.

Sir ,you might be wondering why you should take all the pain but ...

Great share! Thank you for the post. Ship manning

Glad you liked it Sompal...

Great explanation sir.Thank you so much.Also Please explain about various charter party terms and abbreviations.

Thanks, Thirumalar... I will post more articles on charter party terms.

Thank you so much for your articles Sir. These are very easy to understand and very helpful.

Glad you found it helpful Amit...

Sir for new command it's very useful thank you very much

Happy to help Prabhu...

Great Job sir. Keep up the good work

Thanks, Suraj...

hiiya is teh biya

Rajeev jassal hi

very nicely explained !!! am new to this blog .. am very surprised to see this blog .. will read other topics soon

Glad to have you here Naresh...

Excellent explanation sir. where does the term laycan fit into time charter?

When time charter further sub-charter the vessel under voyage charter...

Very good and informative article. I would like to know that how to do we count as a voyage? As far as I know a voyage starts from Arrival port and ends also at Arrival port and this is based on container vessels. But what about bulk carriers? Is it their voyage starts from loading cargoes and ends at complete discharging in arrival port?

Under the time charter, the terms used are delivery of the ship to the charterer and redelivery of the ship to the shipowner. These are decided by the charterer and ship owner in the agreed charter party. For the voyage charter the freight is considered basis arrival load port and back to same port but it can be changed by agreement between ship owner and charterer.

Dear sir, can you please explain the Bareboad charter. Thank you.

I will consider writing on that as well...

Nice article Sir.

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Respected Sir! Very well explained about Time Charter with calculation and diagrams, along with the cost expenses that is being borne by Charterer with reasons, which sounds to be quite helpful as student. May I please request you to write on Demurrage and Laytime Calculation. Thank You!

Hi , Can you advise what is the charter party speed ? is it speed over ground or speed through water ?

Speed over ground

Hi, can you please explain why its not acceptable for the master to keep the original BoL onboard between last port of loading and destination port of arrival?

Dear Capt Rajeev Jassal I appreciate your Curiosity to transfer your knowledge am glad of and it is very helpful to me

On a Time charterer agreement for one year, What is the best numbers of days that can be use to calculate a month.

very informative article. well explained the charter calculations.. marine colleges

Excellent article Sir...Thank you Q. Will laytime,Demurrage and despatch affect the Shipowner in Time Charterers ?

Nice Blog Sir.....Request you to please write blog on bareboat charterer and contract of Affreightment.....Also on insurance Policy and its principles...And clauses of various charter party

Very well said Sir, like what the saying said wrong information is worst than ignorance.. Very much helpful for us who is aspiring to be a Master in the future and all your explanation are clear and well understood. Thumbs up with 5 star Sir. God bless!!

Good one. Keep in touch if you are moving cargoes.

Nice Blog!! The content you have shared is very elaborative and informative. Thanks a lot for sharing such a great piece of knowledge with us.

The article embracing international shipping. And the information regards of entertaining international shipping blogs helps a lot.. here our website https://freelanceshipping.com/

Thank you sir fyr excellent blog.

Dear Capt Rajeev Jassal. We appreciate your good work and the ability to share your knowledge with all Mariners. It is undoubtedly very helpful!!!

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thank you very much

Hello dear iam from lebanon i am broker & charter I am happy to deal with you and thank you

Dear sir, I am from Bangladesh. From your article, we learn many things about time chartering. I have a question. Who will bear the cost of extra fuel consumption in off-hire time.

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Very useful blog sir.....keep sharing such blogs

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This article is very clear and informative, providing valuable insights for anyone interested in understanding the basics of a ship on time charter. all about Ship

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Q2 Highlights and Subsequent Events

• Generated total operating revenues of $83.4 million in Q2, compared to $88.1 million for the first quarter of 2024 ("Q1" or "Q1 2024") primarily related to a drawn-out drydock, lower rates on our single variable charter and lower vessel management fees as contracts came to an end, partly offset by two vessels rolling over to higher rates;
• Net income of $26.5 1 million in Q2, compared to $36.8 1 million for Q1 with the decrease primarily related to a reduced unrealized gain on our mark-to-market interest rate swaps;
• Achieved average Time Charter Equivalent Earnings ("TCE") 2 of $78,400 per day for Q2, compared to $77,200 per day for Q1, supported by full quarter contributions from two vessels that recently started higher rate charters;
• Adjusted EBITDA 2 of $55.7 million for Q2, compared to $58.5 million for Q1;
• Secured a 14-year charter with GAIL (India) Limited during Q2 for one of the two state-of-the-art MEGA LNG carriers currently under construction at Hyundai-Samho (the "Newbuilds");
• Completed our first drydock in Q2 in 43 days and subsequently finished two more drydocks in a timely manner in Q3 2024, taking 21 and 20 days respectively. A fourth drydock, which includes LNGe upgrade, is scheduled for completion in Q4 2024 and is expected to take 45 days;
• Secured a one-year time charter agreement for a TFDE vessel starting in Q3 2024 with an energy major and participating in two formal processes for Kool Tiger , our other MEGA LNG carrier currently under construction; and
• Declared a quarterly dividend of $0.41 per share, payable to shareholders of record on September 9, 2024.

Richard Tyrrell, CEO, commented:

“ During Q2 and the early part of Q3, CoolCo has taken advantage of the seasonally quieter months to complete drydocks and secure additional forward charter cover for both the relative short term and the long term. Our TCE performance for the second quarter increased to $78,400 per day, as the seasonal impact on our one market-linked charter was more than offset by the full-quarter contributions from two vessels that recently began improved time charters.

CoolCo navigated the flat chartering market since our last reporting through a back-to-back 12-month charter that increased its backlog to $1.8 billion. Despite the continuing market volatility, geopolitical uncertainty and focus on energy security that continues to figure prominently in the LNG market, several charterers are adopting short shipping strategies that have the potential to spur sudden demand. Meanwhile, high gas inventories in Europe are increasingly driving LNG shipments longer haul to a diverse set of Asian markets, supporting ton-mile demand and causing the global LNG carrier fleet to be underrepresented in the Atlantic Basin ahead of the winter market.

We look forward to taking delivery of our two state-of-the-art newbuilds later this year, one of which has already secured a 14-year time charter to service the fast-growing Indian LNG market. Following our recent chartering activity, our fleet is now largely fixed through the medium term. We are focused on securing additional coverage for our limited charter market exposure in 2024-25, while maintaining the flexibility to benefit from the substantial market tightening we anticipate as vast new LNG volumes come online in 2025-26. Due to full charter coverage and improved drydock performance, we expect a moderate increase in TCE rate and time and charter voyage revenues for the third quarter compared to the second quarter.”

Financial Highlights

The table below sets forth certain key financial information for Q2 2024, Q1 2024, Q2 2023, 1H 2024 and for the six months ended June 30, 2023 (“1H 2023”).

LNG Market Review

The average Japan/Korea Marker gas price ("JKM") for the Quarter was $11.05/MMBtu compared to $9.43/MMBtu for Q1 2024; with average JKM for Q3 2024 at $10.88/MMBtu as of August 22, 2024. The Quarter commenced with Dutch Title Transfer Facility gas price ("TTF") at $8.76/MMBtu and quoted TFDE headline spot rates of $39,500 per day. The Quarter concluded with TTF at $10.70/MMBtu and quoted TFDE headline spot rates of $60,250 per day. The TFDE headline spot rate has subsequently stabilized at around this level and was quoted at $65,000 per day as of August 16, 2024.

The combination of very high European gas inventories and strong commodity pricing has resulted in a sharp reduction in shipping from the US Gulf into Europe and a correspondingly sharp increase in long-haul, inter-basin voyages. These increased Pacific volumes have been absorbed in part by India and China, but also by a diverse set of importing markets including Thailand, Singapore, Vietnam, and the Philippines.

The combination of geopolitical uncertainty and an oscillation of charter market strength between East and West continues to stretch the LNG carrier fleet even during the seasonally quieter months. With the winter season ahead, the disposition of the global fleet is increasingly skewed towards the Pacific Basin, setting the stage for increased volatility if typical seasonal conditions prevail following two consecutive mild winters.

Operational Review

CoolCo's fleet continued to perform well with a Q2 fleet utilization of 99% compared to 95% for Q1 2024. The offhire was technical in nature and related to the drawn out drydock of the Kool Crystal, which went into drydock in early May and was completed during the Quarter. The Kool Frost entered the yard for its drydock towards the end of the Quarter, with a further two vessels scheduled to start their drydocks during the third quarter of 2024. The average cost of these drydocks is estimated to be approximately $5.5 million per vessel. The last drydock scheduled for this year will also include the upgrade of a vessel to LNGe specification through the retrofit of a sub-cooler with high liquefaction capacity and other performance enhancements at an estimated cost of an additional $15.0 million and an additional 20 days off-hire.

Business Development

The chartering of one of CoolCo’s two Newbuilds sets a strong foundation for the second Newbuild and CoolCo continues to be in discussions with potential charterers regarding its employment of its other newbuild vessel, which is part of two formal bidding processes. CoolCo is also developing leads for its other vessel redelivering late in the second half of 2024.

Financing and Liquidity

At the end of Q1 2024, the Company closed the upsize of the existing $520 million term loan facility maturing in May 2029 in anticipation of the maturity of the two existing sale & leaseback facilities ( Kool Ice and Kool Kelvin ) during the first quarter of 2025. As previously disclosed, the maximum $200 million upsize is available on a delayed drawdown basis, at our option.

As of June 30, 2024, CoolCo had cash and cash equivalents of $84.4 million and total short and long-term debt, net of deferred finance charges, amounting to $1,002.4 million. In addition, CoolCo has approximately $77 million remaining undrawn capacity under its Newbuild Vessel pre-delivery facility. Total Contractual Debt 2 stood at $1,108.3 million, which is comprised of $466.2 million in respect of the $570 million bank facility maturing in March 2027, $442.5 million in respect of the $520 million term loan facility maturing in May 2029, $159.6 million of sale and leaseback financing in respect of the two vessels maturing in the first quarter of 2025 ( Kool Ice and Kool Kelvin ) and $40.0 million in respect of the Newbuilds' financing.

Overall, the Company’s interest rate on its debt is currently fixed or hedged for approximately 76% of the notional amount of net debt, adjusting for existing cash on hand.

Corporate and Other Matters

As of June 30, 2024, CoolCo had 53,702,846 shares issued and outstanding. Of these, 31,254,390 shares (58.2%) were owned by EPS Ventures Ltd ("EPS") and 22,448,456 (41.8%) were owned by other investors in the public markets.

In line with the Company’s variable dividend policy, the Board has declared a Q2 dividend of $0.41 per common share. The record date is September 9, 2024 and the dividend will be distributed to DTC-registered shareholders on or around September 16, 2024, while due to the implementation of the Central Securities Depositories Regulation in Norway, the dividend will be distributed to Euronext VPS-registered shareholders on or around September 20, 2024

The LNG carrier charter market remains divided between the highly variable spot market and the more stable time charter market. With the spot market dominated by sub-lets and steam turbine carriers, while more modern tonnage owned by independent owners, such as CoolCo, prioritize term charters, where prevailing rates remain within a narrower and materially higher range.

Long-term initial charters on legacy steam turbine vessels continue to end, returning these vessels to a charter market that increasingly favors more modern, fuel-efficient tonnage with superior boil-off and environmental profiles. Representing approximately 30% of the global LNG carrier fleet, these legacy vessels face reduced utilization and future prospects, presenting substantial potential for a combination of scrapping, conversion into floating infrastructure, or redeployment into niche regional trades.

In contrast to the volatility and uncertainties of the near-term market, we believe longer-term sector prospects remain strongly supported by the pipeline of new liquefaction projects that have already reached Final Investment Decision (FID) and are set to increase the total volume of LNG on the water by more than 50% in the coming years. The sizable current newbuild orderbook consists mainly of vessels secured on a long-term basis to transport these new volumes, with a significant portion of that orderbook destined for charterers who have traditionally been disinclined to maximize vessel utilization through the out-charter/sub-let market. Coupled with the departure of steam turbine ships from mainstream trades, net fleet growth in the years ahead is expected to be well matched and potentially outpaced by expected increased demand for modern LNG carrier tonnage. With both an energy security focus and winter market factors capable of absorbing even more tonnage beyond underlying transportation demand, we anticipate that the multi-year outlook remains highly favorable for independent owners of high-quality modern vessels.

Forward Looking Statements

This press release and any other written or oral statements made by us in connection with this press release include forward-looking statements within the meaning of and made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities and events that will, should, could, are expected to or may occur in the future are forward-looking statements. You can identify these forward-looking statements by words or phrases such as “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “will,” “may,” “should,” “expect,” “could,” “would,” “predict,” “propose,” “continue,” or the negative of these terms and similar expressions. These forward-looking statements include statements relating to our outlook, industry trends, expected results, including our expected TCE and revenue in the third quarter of 2024, expectations on chartering and charter rates, chartering plan, expected drydockings including the cost, timing and duration thereof, and impact of performance enhancements on our vessels, timeline for delivery of newbuilds, dividends and dividend policy, expected growth in LNG supply and the impact of new liquefaction projects on LNG volume expected industry and business trends and prospects including expected trends in LNG demand and market trends and potential future drivers of demand expected trends in LNG shipping capacity including net fleet growth, LNG vessel supply and demand factors impacting supply and demand of vessels, rates and expected trends in charter rates, backlog, contracting, utilization and LNG vessel newbuild order-book, expected multi-year outlook for independent operators, statements made under “LNG Market Review” and “Outlook” and other non-historical matters.

The forward-looking statements in this document are based upon management’s current expectations, estimates and projections. These statements involve significant risks, uncertainties, contingencies and factors that are difficult or impossible to predict and are beyond our control, and that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Numerous factors could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements including:

• general economic, political and business conditions, including sanctions and other measures;
• general LNG market conditions, including fluctuations in charter hire rates and vessel values;
• changes in demand in the LNG shipping industry, including the market for our vessels;
• changes in the supply of LNG vessels;
• our ability to successfully employ our vessels;
• changes in our operating expenses, including fuel or cooling down prices and lay-up costs when vessels are not on charter, drydocking and insurance costs;
• compliance with, and our liabilities under, governmental, tax, environmental and safety laws and regulations;
• risk related to climate change, including climate-change or greenhouse gas related legislation or regulations and the impact on our business from physical climate-change related to changes in weather patterns, and the potential impact of new regulations relating to climate change and the potential impact on the demand for the LNG shipping industry;
• changes in governmental regulation, tax and trade matters and actions taken by regulatory authorities;
• potential disruption of shipping routes and demand due to accidents, piracy or political events and/or instability, including the ongoing conflicts in the Middle East;
• vessel breakdowns and instances of loss of hire;
• vessel underperformance and related warranty claims;
• our expectations regarding the availability of vessel acquisitions;
• our ability to procure or have access to financing and refinancing;
• continued borrowing availability under our credit facilities and compliance with the financial covenants therein;
• fluctuations in foreign currency exchange and interest rates;
• potential conflicts of interest involving our significant shareholders;
• our ability to pay dividends;
• information system failures, cyber incidents or breaches in security;
• adjustments in our ship management business and related costs; and
• other risks indicated in the risk factors included in our Annual Report on Form 20-F for the year ended December 31, 2023 and other filings with and submission to the U.S. Securities and Exchange Commission.

The foregoing factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement included in this report should not be construed as exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

As a result, you are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless required by law.

Responsibility Statement

We confirm that, to the best of our knowledge, the interim unaudited condensed consolidated financial statements for the six months ended June 30, 2024, which have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) give a true and fair view of the Company’s consolidated assets, liabilities, financial position and results of operations. To the best of our knowledge, the financial report for the six months ended June 30, 2024 includes a fair review of important events that have occurred during the period and their impact on the interim unaudited condensed consolidated financial statements, the principal risks and uncertainties, and major related party transactions.

August 29, 2024 Cool Company Ltd. London, UK

Questions should be directed to: c/o Cool Company Ltd - +1(441) 295 2244

Appendix A - Non-GAAP Financial Measures and Definitions Non-GAAP Financial Metrics Arising from How Management Monitors the Business

In addition to disclosing financial results in accordance with U.S. generally accepted accounting principles (US GAAP), this earnings release and the associated investor presentation and discussion contain references to the non-GAAP financial measures which are included in the table below. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with US GAAP, and the financial results calculated in accordance with US GAAP. Non-GAAP measures are not uniformly defined by all companies, and may not be comparable with similar titles, measures and disclosures used by other companies. The reconciliations from these results should be carefully evaluated.

Reconciliations - Performance Measures

Adjusted EBITDA

Average daily TCE

Reconciliations - Liquidity measures

Total Contractual Debt

Total Company Cash

Other definitions

Contracted Revenue Backlog

Contracted revenue backlog is defined as the contracted daily charter rate for each vessel multiplied by the number of scheduled hire days for the remaining contract term. Contracted revenue backlog is not intended to represent Adjusted EBITDA or future cashflows that will be generated from these contracts. This measure should be seen as a supplement to and not a substitute for our US GAAP measures of performance.

This information is subject to the disclosure requirements in Regulation EU 596/2014 (MAR) article 19 number 3 and section 5-12 of the Norwegian Securities Trading Act.

c/o Cool Company Ltd - +1(441) 295 2244

• Diana Shipping-stock
• News for Diana Shipping

Diana Shipping Inc. Announces Time Charter Contract for m/v DSI Pegasus with Cargill Ocean Transportation

ATHENS, Greece, Aug. 29, 2024 (GLOBE NEWSWIRE) -- Diana Shipping Inc. (NYSE: DSX), (the “Company”), a global shipping company specializing in the ownership and bareboat charter-in of dry bulk vessels, today announced that, through a separate wholly-owned subsidiary, it has entered into a time charter contract with Cargill Ocean Transportation (Singapore) Pte. Ltd., for one of its Ultramax dry bulk vessels, the m/v DSI Pegasus. The gross charter rate is US$15,250 per day, minus a 4.75% commission paid to third parties, for a period until minimum June 1, 2025 up to maximum August 1, 2025. The charter is expected to commence on September 4, 2024. The m/v DSI Pegasus is currently chartered, as previously announced, to Reachy Shipping (SGP) Pte. Ltd., at a gross charter rate of US$14,000 per day, minus a 5.00% commission paid to third parties.

The “DSI Pegasus” is a 60,508 dwt Ultramax dry bulk vessel built in 2015.

The employment of “DSI Pegasus” is anticipated to generate approximately US$4.09 million of gross revenue for the minimum scheduled period of the time charter.

Upon completion of the previously announced sale of m/v Houston, Diana Shipping Inc.’s fleet will consist of 38 dry bulk vessels: 4 Newcastlemax, 8 Capesize, 5 Post-Panamax, 6 Kamsarmax, 6 Panamax and 9 Ultramax. The Company also expects to take delivery of two methanol dual fuel new-building Kamsarmax dry bulk vessels by the second half of 2027 and the first half of 2028, respectively. As of today, the combined carrying capacity of the Company’s fleet including the m/v Houston and excluding the two vessels not yet delivered, is approximately 4.4 million dwt with a weighted average age of 11.07 years. A table describing the current Diana Shipping Inc. fleet can be found on the Company’s website, www.dianashippinginc.com . Information contained on the Company’s website does not constitute a part of this press release.

About the Company

Diana Shipping Inc. is a global provider of shipping transportation services through its ownership and bareboat charter-in of dry bulk vessels. The Company’s vessels are employed primarily on short to medium-term time charters and transport a range of dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes.

Cautionary Statement Regarding Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, Company management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond the Company’s control, the Company cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for dry bulk shipping capacity, changes in the Company’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Company’s vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, including risks associated with the continuing conflict between Russia and Ukraine and related sanctions, potential disruption of shipping routes due to accidents or political events, including the escalation of the conflict in the Middle East, vessel breakdowns and instances of off-hires and other factors. Please see the Company’s filings with the U.S. Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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28 Aug 2024 08:00 CEST

Golden Ocean Group Limited

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Voyage Estimation

Ship Voyage Estimation is forecasting of costs and revenues. Unavoidably, Ship Voyage Estimation includes comparing one voyage with an alternative voyage to see which produces the most immeasurable yield. Ship Management or Shipbrokers are closely involved in Ship Voyage Estimation calculations. Ship Manager must be adequately aware of the process of voyage estimating. It is important to understand how numerous pieces of data, supplied by the ship manager, apply to the process of estimating the profitability of a proposed voyage.

Voyage Estimation incorporates both Voyage and Time Charter Trips (TCT). Time Charter Trips (TCT) are infrequently as straightforward as they seem. Ships do not run like clockwork, therefore, in Voyage Estimation, it is impracticable to calculate to perfection. Voyage Estimation aim should be less than absolute accuracy and it is vital to seek to achieve this and to test the accuracy of the Voyage Estimates against the Final Voyage Results.

For Voyage Estimation , it is also necessary to know maritime geography, distances of main ports, and load line zones. There are many digital distance tables, however, to avoid ridiculous mistakes shipbrokers should have a reasonably accurate idea of the major world distances. A helpful method is to divide the world into regions, generally this principally falls into oceans, and then learn several strategic distances across each region.

Preferably, instead of actual distance, a shipbroker can think in terms of days steamed. For example, a speed of 14 knots works out at approximately 3 days per 1,000 nautical miles. Therefore, it is easy to remember that a transatlantic voyage from US Gulf to the Netherlands is performed in 15 days. Under this easy method, voyages can be calculated and remembered. After calculating the length of the sea voyage, a frame can be produced for Voyage Estimation.

Ship Voyage Length

Ship voyage should always be from the time and the place where the ship completes discharge of the previous cargo. Therefore, the first part of the voyage is the Ballast Leg unless the shipowner is fortunate enough to secure a cargo out of the port in which the ship has just discharged.

Some shipbrokers and ship managers commence the voyage at the loading port and follow the laden passage with a theoretical ballast back to the loading port again. However, while this view might be realistic for tankers, dry cargo tramp ships rarely proceed on the same voyage twice so this is rarely a practical solution. With distances to hand, it is not challenging to estimate the length of the sea passage including the Ballast Leg. Estimating the time spent in port can be a more prominent problem.

Estimating the time spent in port for tankers is moderately simple as most tanker charter-parties incorporate a standard 72 hours all purposes laytime. However, the time spent in port for dry cargo bulk carriers differs enormously. The difficulty is that a shipbroker or ship manager cannot usually calculate the port time until they know the cargo quantity. A shipbroker or ship manager cannot calculate the cargo lift until they know the bunkers which they cannot work out until they know the port time. Dry cargo ships consume little bunkers in port which can be safely neglected for initial cargo estimates.

A shipbroker or ship manager should be very careful over the voyage route selected. Sometimes there are alternative routes and only a negligible difference will tilt the pendulum in favor of one or the other. A shipbroker or ship manager should consider bad weather, high canal tolls on one route, and cheaper bunkers on another. In Voyage Estimation, ship speed is another crucial factor. In some circumstances, it might be more beneficial to steam slowly and economize on bunkers.

Cargo Quantity

A shipbroker or ship manager needs to know the ship’s total deadweight (DWT). From the ship’s total deadweight (DWT), a shipbroker or ship manager must first deduct the constants (stores, water, lubricants, spares, the weight of the crew). Total constants weight is rarely critical. Total constants weight is in the region of 400 to 500 metric tons for most deep-sea ships of 30,000 DWT and above. Moreover, a shipbroker or ship manager needs to deduct the bunkers on board to calculate the true cargo capacity DWCC (Deadweight Cargo Capacity). A proper figure for DWCC (Deadweight Cargo Capacity) is calculated, however, this is not the end of the Voyage Estimation .

The ship may be able to lift a particular tonnage of cargo but also the ship must have enough space to carry that cargo. Therefore, a shipbroker or ship manager must also calculate the Stowage Factor (SF) . Theoretically, by dividing the grain or bale cubic of the ship by the Stowage Factor (SF), a shipbroker or ship manager calculates the ship’s volume capacity. However, if there are various types of grades of cargo to be separated, it may be impossible even to fill the ship. Furthermore, ship trim and stability must also be considered.

A shipbroker or ship manager must also consider the load-line zones and calculate the cargo accordingly. All load-line zones transited between loading and discharging ports must be considered. For instance, a ship cannot enter a winter zone when loaded to summer marks.

When the cargo quantity, loading rates, and discharging rates per day are known, then the port time can be estimated with some accuracy. However, there are some pitfalls because it is rare for weekends and holidays to count in dry cargo charter-parties and these, united with notice time and weather delays, extend the port time before demurrage is likely to commence. Example:

A bulk carrier is to load 49,000 metric tonnes of cargo and the charter loading rate is 3,500 tonnes (PWWD) per weather working day of 24 consecutive hours, Sundays and Holidays Excepted (SHEX). If a shipbroker or ship manager divides 49,000 by 3,500, the loading time allowed to the charterers is 14 days. However, 14 days excludes weekends and if you consider the working week to be 5 days, the laytime allowed approaches 3 weeks. If allowances are also made for notice time and some weather delays, it will become realistic to allow 20 days in port for loading operation. If loading operation is to take place throughout extensive Public Holidays (Christmas, New Year, Ramadam), even more port time should be allowed. If the time allowed includes Sundays and Holidays (SHINC) less allowance will be needed, in this example, approximately 15 days. Even with Sundays and Holidays (SHINC), there are unavoidable delays such as shifting, notice time, etc.

Generally, the full-time allowance should be put in the Voyage Estimation and demurrage/despatch should be ignored. Furthermore, different criteria have to be used for Despatch Charters for particular trades such as sugar. It is very well-known that ships habitually load and discharge completely within their laytime and, however, shippers and receivers expect to earn considerable despatch money. Therefore, when comparing two voyages, Despatch Charters will present an abnormal disparity. Unfortunately, there is no shortcut to knowledge in such cases, and a shipbroker or ship manager must be aware of the trades where fast turn-rounds are to be found. In Despatch Charters, a shipbroker or ship manager should estimate a lesser port time than allowed. Therefore, a decent addition to the expenses must be made to cover the inevitable despatch money.

In Voyage Estimation , if more than one port of loading and/or discharging is used, extra hours must be allocated for the time required in the actual process of entering and leaving.

Other Delays in Voyage Estimation

Bunker : in some ports, bunkering might be lengthy. In Voyage Estimation, a shipbroker or ship manager should allocate one (1) day for each bunkering call.

Canal Transit : canal transits unavoidably lengthens the voyage, therefore, a shipbroker or ship manager should allocate two (2) days each for passage through Suez Canal and Panama Canal in Voyage Estimation. Time might be lost for waiting and for the canal transit.

Bad Weather : usually a shipbroker or ship manager does not allow additional steaming time for possible bad weather unless it is certain from the nature of the voyage that delay will be experienced.

Starting the Voyage Estimation

When the main components are available, a shipbroker or ship manager can begin the Voyage Estimation calculations. Broadly, the Voyage Estimation calculation consists of income minus expenditure. Voyage Estimation form and procedure used is a matter of personal opinion however these can all be classified under one method. Most shipping companies have their Voyage Estimation layout depending on the type of ship they manage.

It is extremely easy to reduce the Voyage Estimation on a piece of paper, indeed. However, before that level is reached, significant experience has to be gained at a more leisurely pace and this is where a set format is so essential. In Voyage Estimation, if all the different items of income and expenditure are set out, it is hard to forget the odd item, which can make the difference between profit and loss. If a shipbroker or ship manager is likely to be involved in regular Voyage Estimation, he drafts out a suitable form and uses the Voyage Estimation draft constantly.

Today, there are computer programs for Voyage Estimation such as Netpas Estimator , however mastering the manual Voyage Estimation method is essential to avoid silly errors with the computer.

Voyage Estimation can be made appropriately on plain paper; the essential point is to learn the method. Generally, a shipbroker or ship manager follows the here below Voyage Estimation method:

1- A shipbroker or ship manager preplans the voyage, duration, and bunker consumption. Preplanning enables a shipbroker or ship manager to observe at a glance just what is intended. This is called an itinerary.

2- A shipbroker or ship manager calculates what cargo can be loaded. This part needs to be completed in conjunction with the itinerary. For instance, when port time is estimated against a daily loading or discharging rate.

3- A shipbroker or ship manager records all expenses such as bunkers, port disbursements, canal costs, stevedoring, despatch, extra insurance premium are obvious examples.

4- A shipbroker or ship manager assess Income, Profit, and Loss.

In the Voyage Estimation process here above, in part three (3), bunker consumption is presumably the most difficult to calculate. Ship Bunkering is an art and no two voyages are likely to be the same, due to seasonal changes, price fluctuation, and the need to balance bunker prices against freight income.

When transiting a canal or a narrow waterway a ship may run on MGO (Marine Gas Oil) in the main engine although this is becoming less common with modern engine designs. MGO (Marine Gas Oil) is of a higher quality and more expensive than IFO (Intermediate Fuel Oil). MGO (Marine Gas Oil) usage result in a more instant engine response to navigation movements. During MGO (Marine Gas Oil) usage, ordinary daily speeds and consumptions do not apply. The ship steams slowly and consumes bunkers more economically. Therefore, it might be necessary to estimate normal speed and consumption to and from either end of the canal, adjusting time and consumption appropriately.

Port costs cannot easily be estimated without experience and most shipping companies keep records of previous port calls. Organizations such as BIMCO (The Baltic and International Maritime Organization) and INTERTANKO (International Association of Independent Tanker Owners) contribute important information on many ports but presumably the most accurate way is to call the port agent in question with necessary details of the ship and ask the port agent to provide a Proforma Disbursement Account (PDA). Normally, canal dues are based on the ship’s Canal Tonnage as the canal authorities tend to add in more cubic earning spaces when they grant the ship a canal certificate. A shipbroker or ship manager should keep in mind that mere calculation of the canal dues payable will not be sufficient, as extra charges yield for such items as agency and towage.

In the Voyage Estimation process , there is the possible expense of despatch payable if the trade is such that the ship is turned around much faster than the laytime allows. If a shipbroker or ship manager is in any doubt, it is more beneficial to allow full time in the Voyage Estimation to calculate the most pessimistic result and be on the safe side.

In the Voyage Estimation process , a shipbroker or ship manager should also include cargo-handling expenses and extra insurance premiums such as breaching INL (Institute Navigating Limits) or extra WRI (War Risk Insurance) for trading to regions beset by the risk of warlike action.

A shipbroker or ship manager should calculate the cargo intake and multiply this quantity by the rate of freight offered by charterers. The sum is known as the Gross Freight, from which have to be deducted any Shipbrokers’ Commissions due. Besides, it is common to deduct any Freight Tax at this stage. Freight Tax and ILW (In Lieu of Weighing) are being almost invariably a percentage of the Freight. The result after deducting these items from Gross Freight is called Net Freight.

The Voyage Estimatio n result can be calculated by subtracting expenses from income and dividing the result by the number of days taken for the voyage. The result is the Gross Daily Profit. Gross Daily Profit gives us an easily comparable amount for any variety of different voyages. To calculate the Net Daily Profit, it is essential to include the Daily Running Costs. A shipbroker or ship manager is not concerned as to how that daily figure is made up but will simply want a lumpsum per day. It is the choice of the shipowner whether or not the capital costs are included in this figure however, whether capital costs are included or not, it is important to be consistent.

Tankers Voyage Estimation

There are a few dissimilarities between Voyage Estimation for dry cargo ships and tankers. Tanker charters based upon Worldscale , the laytime calculation is easier as the scale allows for 72 running hours total for loading and discharging and 96 hours total in port. An expense in tankers that do not occur in dry cargo ships is the consumption of bunkers for ancillary purposes such as cargo heating, pumping cargo, and tank cleaning.

It is exceptionally challenging to estimate bunker consumption for heating cargo depending, as it does, on the temperature at which the cargo is loaded, whether in wing or center tanks, and on the ambient temperature of the sea and air during the voyage. Only the technical department can give an accurate estimation for this purpose as, without their available statistics, it can only be pure guesswork. Pumping and tank cleaning is simpler, however the technical department should be asked for an average bunker consumption based on experience.

Time Charter Voyage Estimation

When charterers take ships on time charter for trips, it is apparent that charterers want to estimate the daily profit on Time Charter Trip (TCT) in the same way as a Voyage Charter to compare the two results. Usually, Charterers prefer to take a ship on Time Charter (TC), either for a Trip or Period, as it gives charterers flexibility and also the possibility of diminishing their costs.

Time Charter (TC) Voyage Estimation would be an extremely simpler operation if the ship is taken on delivery at the previous discharge port and redelivered on completion of the voyage in question. Shipowner or ship operator simply deduct the Daily Running Cost from the Hire earned per day to achieve the daily profit. Commission should be deducted to achieve the daily net profit. If there is any difference between the charter price of bunkers paid by charterers on delivery and the actual price paid by shipowners, this must similarly be taken into account in the calculations. In Time Charter (TC) Voyage Estimation, problems arise when the ship is not taken on hire immediately after the previous employment and allowance has then to be made, not only for the time lost to shipowners whilst the ship is unemployed, but also for the bunkers consumed during that period. The calculation is not challenging if the income and expenditure and the number of days for the entire voyage are considered. By grossing up the daily hire receivable for every day the ship is likely to be on charter and deducting the Daily Running Cost, the shipowner obtain the profit for the entire operation. Daily Running Cost must be charged not only for the trip period but also for the ballast or waiting time before hire commences plus any bunkers, port charges, canal dues, etc. which are incurred by the shipowners before commencement of hire. To calculate the daily profit it is then necessary to divide by the number of days involved which will include those days ballasting or waiting before ship delivery, not just the days the ship is on hire. By this method, the shipowner obtains a comparable number to be set against other Voyage Estimations.

If several Voyage Estimations show similar results, it is up to the shipowner to decide whether he prefers a short or long voyage. The decision may depend on the shipowner’s expectations of the future increase or decrease of the shipping market and also depending on which region the shipowner prefers to complete the voyage for future trading. Sometimes, a shipowner may prefer a voyage with a lower return if it positions the ship ideally for a subsequent voyage or drydocking.

Voyage Estimation Example

In Voyage Estimation Example here below, a shipowner compares two (2) Voyage Estimations for his ship called MV HANDYBULK YAGMUR and selects the most profitable voyage. The question is presented here below provides all the data required to make the Voyage Estimation calculations. However, we simplified the problem that would normally arise in practice, where a shipbroker or ship manager would have to search all the data such as distances, and cheapest bunkers available.

A shipowner has the following vessel available in April at Pemba (Mozambique) following discharge of a cargo:

MV HANDYBULK YAGMUR 2021 Built Cyprus Flag Lloyd’s Register (LR) 15,240 SDWT (Summer Deadweight Tonnage) 8.86 meters Summer Saltwater Draft 5 Holds/5 Weatherdeck Hatches Flush Tweendecks No 1,2,3 & 4 Bridge & Engines 4/5ths aft. No. 5 a single hold, floored over Derricks: 1 x 50, 4 x 10, 6 x 5 tonnes SWL Bale: 19,520 cbm (689,350 cft) Grain: 21,295 cbm (752,030 cft) LOA: 141 m Beam: 20.45 m Constant Weights: 150 tonnes Speed/Consumption At Sea: 13 knots 18 mtons VLSFO + 1.5 mtons MGO Port Idle: 1.5 mtons MGO per day Port Working: 2.5 mtons MGO per day VLSFO (Very Low Sulphur Fuel Oil) MGO (Marine Gas Oil)

Bunkers Remaining on Board (ROB) 300 mtons VLSFO and 40 mtons MGO MV HANDYBULK YAGMUR carries a Safety Surplus of 50 mtons VLSFO and 15 mtons MGO at all times. These quantities to be allowed for in any cargo quantity calculation (DWCC) but not to be costed in voyage results.

The Shipowner is analyzing offering for the following cargo: A/C Minerals Ltd Full Cargo Bulk Minerals Loading Port: 1 sb 1 sp Mauritius Discharging Port: 1 sb London Loading Rate: 1,500 mtons PWWD SHEX Discharging Rate: 750 mtons PWWD SHEX Freight USD14.00 per mtons Demurrage USD 2,150 /Half Despatch Laytime Saved Bends 5.5% Total Commission including (3.75% Address Commission)

A shipbroker or ship manager knows from previous experience: 1- Actual loading takes approximately 2 days, therefore allow for payment of despatch in the Voyage Estimation. 2- London is usually a congested port, therefore allow full laytime for discharge.

For Voyage Estimation: a- Mauritius/London via Suez Canal b- Mauritius/London via Cape of Good Hope (bunkering at Durban)

You will require the following information: 1- Distances: Pemba/Dar Es Salaam 475 nm (nautical miles) Dar Es Salaam/Durban 1550 nm (nautical miles) Dar Es Salaam/Suez 3650 nm (nautical miles) Durban/London 6850 nm (nautical miles) Suez/London 3200 nm (nautical miles)

2- Suez Canal Transit Allow 2 days to Bunker and transit the Suez Canal consuming: 7 mtons VLSFO 7 mtons MGO.

3- Bunker Prices (USD/pmt) VLSFO MGO Remaining on Board (ROB) 70 145 Suez 85 180 Durban 85 325

4- Port Disbursements (USD) Dar Es Salaam 17,500 Durban 2,500 Suez Canal 35,000 London 45,000

Routing via the Suez Canal:

MV HANDYBULK YAGMUR is anticipated to steam around 312 miles per day at sea (13 x 24 hours) weather permitting. Usually, percentages of days at sea are best rounded up to whole days for simplicity of calculation and to allow for any unexpected delays. However, in short voyage estimations, this is not realistic. Therefore, for the 475 nm (nautical miles) between Pemba (Mozambique) and Dar Es Salaam 1.5 days should be allowed (475/312 = 1.522) although this percentage can be disposed of in the final voyage days analysis by allowing a compensating 2.5 days to load in Dar Es Salaam. Dar Es Salaam to the Suez Canal is 3,650 nm (nautical miles) which, divided by 312 miles per day equals around 12 days. 2 days is allowed for the Suez Canal transit and a canal bunker consumption of 7 mtons VLSFO and 7 mtons MGO, these items can be entered. The final leg of 3,200 nm (nautical miles) from the Suez Canal to London should take about 10 steaming days.

We are going to calculate the port time in London however, since we are to work on a daily discharge rate in London and allow full laytime. So, we calculate the quantity of cargo on board. Furthermore, we should consider Load-Line Zones and any port limitations en route. Luckily, MV HANDYBULK YAGMUR will be in summer zones throughout the voyage so that this exercise does not have to assume the discussion of Load-Line Zones which will be dealt with in a later lesson. Fully laden MV HANDYBULK YAGMUR’s draft is still within the limits of the Suez Canal and there is sufficient depth of water at both loading and discharging ports. As a result, no restricting factors are altering the quantity of cargo to be loaded apart from those of the ship itself, its cubic capacity, and deadweight. Bulk minerals stow around 1.13 to 1.22 cubic meters per tonne (40 to 43 cubic feet).

Allowing for an increase to this calculation for loss of trimming spaces, as a result of tween-deck overhangs, of an extra 10% as compared with a bulk carrier, the cubic space available should still be more than adequate. 21,295 cubic metres divided by 1.34 (1.22 + 10%) = 15,900 mtons approximately. Consequently, cargo intake can be based on the maximum DWT (Deadweight) available on sailing from Dar Es Salaam. In other words, up to summer marks less constant weights and bunkers. Constant weights are known. Bunkers need to be calculated. T

he longest voyage leg is that from Dar Es Salaam to the Suez Canal (12 days) and therefore we estimate that the MV HANDYBULK YAGMUR will have maximum bunkers on board at the commencement of the voyage. MV HANDYBULK YAGMUR has 300 mtons VLSFO and 40 mtons MGO ROB (remaining on Board) when sailing from Pemba (Mozambique). Therefore, from the MV HANDYBULK YAGMUR’s summer deadweight (SDWT) must be deducted an allowance for bunkers and constant weights calculated to remain on board when sailing from Pemba (Mozambique) to that stage of the voyage. Therefore:

Summer Deadweight (SDWT) 15,240 mtons Less VLSFO 300 – 27= 273 mtons MGO 40 – 6= 34 mtons (2 mtons MGO at Sea + 4 mtons MGO at Port) Constant Weights= 150 mtons Estimated Cargo Intake (DWCC)=14,783

300 mtons VLSFO and 40 mtons MGO includes the allowance for Safety Surplus. Bulk cargo is loaded mechanically at Dar Es Salaam by shore equipment. Hence, the MV HANDYBULK YAGMUR’s port consumption will not be increased to 2.5 mtons daily, which would be the case if MV HANDYBULK YAGMUR’s cranes were used. Discharging at London will also be by shore equipment, the HANDYBULK YAGMUR’s cranes will remain idle. To find the total discharge duration in London, Estimated Cargo Intake (DWCC)=14,783 is divided by daily discharge rate of 750 mtons equals to 20 days (19.7 days).

However, discharge takes place on SHEX (Sundays Holidays Excluded) terms, therefore, build in time lost for weekends and holidays. A magic number that can be used in normal circumstances is the Factor of 1.4, which is 2 days lost for every 5 worked, a number that provides an estimate for SHEX (Sundays Holidays Excluded) terms. 20 days x 1.4 = 28 days on full laytime at London.

We have completed the Voyage Itinerary , Bunker Consumption , and Cargo Calculation of the Voyage Estimation . Now, we are going to calculate and combine all voyage expenses. We start calculating the Bunker Costs:

MV HANDYBULK YAGMUR has on board 300 mtons VLSFO and 40 mtons MGO at the commencement of the voyage, VLSFO cost at USD 70 and MGO cost USD 45 per tonne. The bunker balance required 130 mtons VLSFO and 48 mtons MGO must be taken at Suez and the cost should be added accordingly. The estimated disbursements (Port DAs) at Dar Es Salaam, Suez Canal, and London should be entered into Voyage Estimation. Now, we are going to estimate the Despatch Money. To calculate Despatch Money, we should take the estimated cargo of 14,783 mtons and divide it by the loading rate of 1,500 tonnes daily which is approximately 10 days. Loading will take approximately 2 days, and this can be deducted, to leave 8 days.

If the MV HANDYBULK YAGMUR arrives and loads in midweek, then this will be the number on which to base despatch. If loading takes place over a weekend, time loading might not count (if SHEX EIU). Furthermore, we should consider if the despatch is to be calculated based on All-Time Saved or on Working Time Saved. In this Voyage Estimation example, we are going to use Working Time Saved, and allow 8 days for despatch at Dar Es Salaam. Despatch Money can be calculated as:

Despatch Money equals half of Demurrage Rate (USD 2,150)= USD 1,025 Despatch $1,025 x 8 days= USD 8,200

We are going to calculate the income and the estimated result. The freight rate is USD 21 per tonne. Therefore, 14,783 mtons x $21 per tonne less 5.5% total commission leaves us with a net freight of USD 293,369. From this must be deducted the total expenses of USD 156,886, leaving a Gross Voyage Surplus of USD 136,483.

Gross Voyage Surplus of USD 136,483 is then divided by the estimated number of days required to perform the voyage and we have a return of USD 2,437 gross daily which is before the deducting of daily ship running costs. If ship daily running costs were given, we deduct daily running costs from the gross daily income to arrive at the net daily income.

Routing via the Cape of Good Hope:

We have already calculated Pemba (Mozambique) to Dar Es Salaam and port time there. We have already calculated the distances from Dar Es Salaam to Durban and from Durban, via the Cape of Good Hope, to London, and can base time and consumption on this data. We are going to estimate the port time in London. Therefore, we are going to calculate cargo intake. The sea distance from Durban to London is approximately 22 days at 13 knots, weather permitting. Therefore, bunkers remaining on board (ROB) at the beginning of this leg will be greater than for any other leg and will consequently affect the maximum cargo quantity which can be allowed on board at that point. Thus, although MV HANDYBULK YAGMUR can load more cargo than would be required at Dar Es Salaam, we should remember always that the ship’s summer freeboard must not be submerged at any stage of the journey.

If MV HANDYBULK YAGMUR is loaded to her full marks at Dar Es Salaam she would be overloaded when taking on necessary bunkers at Durban. Consequently, Durban sailing on summer marks is the restricting factor in this part of the estimate. Durban is located in a permanent summer load-line zone. Since the ship would then steam to London in either summer or tropical zones, there are no restricting factors of this nature. So, we can estimate the cargo intake:

Summer Deadweight: 15,240 mtons Less: Durban/London 396 mtons VLSFO Safety Surplus 75 mtons VLSFO Durban/London 33 mtons MGO Safety Surplus 15 mtons MGO Constant Weights= 150 mtons Estimated Cargo Intake (DWCC)=14,571

Therefore, Estimated Cargo Intake (DWCC) via the Cape of Good Hope is going to be less than steaming via the Suez Canal, but the difference is marginal and will not affect the time needed to discharge on full laytime in London:

14,571 mtons / 750 mtons daily discharge rate x 1.4 = 27.20 days approximately 28 days

Routing via the Cape of Good Hope, port and transit expenses are similar to the routing via the Suez Canal, except that Suez Canal tolls are avoided however, instead, Durban port costs are included. Despatch Money is also similar, the difference in the cargo loaded making only minor effect.

The extra steaming time is reflected in extra bunker consumption. Once again the 300 mtons VLSFO and 40 mtons MGO remaining on board (ROB) at the commencement of the voyage must be costed at USD 70 and USD 145 per tonne respectively. However, we should add the balance of VLSFO and MGO required to steam London at the Durban prices of USD 85 and USD 325 respectively. Therefore, the estimated total expenses for routing via the Cape of Good Hope is USD 138,726. The smaller cargo intake indicates a marginally lower income of USD 289,162, however, lower-income is offset by these reduced cargo expenses to leave an increased Gross Voyage Surplus of USD 150,436.

However, routing via the Cape of Good Hope takes longer than the route via the Suez Canal. Nonetheless, the net result is more profitably via the Cape of Good Hope by an increase of around USD 100 per day. Routing via the Cape of Good Hope generates a Gross Daily Income of $150,435/59 = $2,550 against routing via the Suez Canal generates a Gross Daily Income of $2437.

Voyage Estimation Time Charter Example

Let us assume that MV HANDYBULK YAGMUR is proposed a Time Charter business as follows:

Delivery APS Durban Time Charter Trip (TCT) via safe ports South and East Africa with Minerals. Redelivery DOP Izmir Duration about 60 days, without guarantee 5% Total Commission Charterer’s Hire Idea Maximum $3,000 per day

If the MV HANDYBULK YAGMUR performs this voyage, the shipowner would probably need to ballast after Izmir to the London-Continent to seek the next cargo. We are going to calculate if this time charter alternative is a better proposition than the voyage

Pemba (Mozambique)/Durban 1,350 nm (nautical miles) Izmir/London 2,775 nm (nautical miles)

In Voyage Estimation Time Charter Calculation , we should calculate the Gross Daily Return, so that fair comparison can be made with a voyage charter alternative, as well as other Time Charter Trips (TCT). In Voyage Estimation Time Charter calculation, brokerages and commissions must be deducted. Allowances have to be made where necessary for time and voyage expenses incurred from the start point of the exercise through to the start of the time charter, and again, from the completion of the time charter through to the end of the estimated voyage.

MV HANDYBULK YAGMUR will be open at Pemba (Mozambique) where she can proceed either to Dar Es Salaam to load minerals, or ballast to Durban to deliver on to Time Charter. The mineral cargo is going to be discharged in London and, for a tween-decker, the shipowner will certainly try to fix outwards from the Continent. However, the Mediterranean market is normally weaker for tween-deckers than is the Continent market. If we fix the Time Charter Trip (TCT) from Durban to Izmir, the shipowner will presumably ballast from Izmir to the Continent which must be considered. Therefore, we have another adjustment to perform following redelivery in Izmir. Pemba (Mozambique) to Durban and, at 13 knots, takes 4.5 days (1350/ 312). The distance from Izmir to London is 2775 nm (nautical miles) equating to a steaming distance of 9 days. Therefore, a total extra steaming of 13.5 days. We are going to calculate the approximate duration of the Time Charter Trip (TCT):

Income: USD 3,000 less 5% commission x 60 days= USD 171,000 Expenses: VLSFO 13.5 days x 18 (tonnes daily) x USD 70 per tonne = USD 17,010 MGO 13.5 days x 1.5 (tonnes daily) x USD 145 per tonne = USD 2,937 Total Expenses: USD 19,947 Income USD 171,000 less Expenses USD 19,947 = USD 151,053 USD 151,053/ 73.5 total days overall (60 + 13.5) = USD 2,055 daily

The Time Charter Trip alternative is not a better proposition than the voyage.

What is Ship Voyage Estimation?

Voyage Estimation is the calculation of the profit or loss that a ship will make from a proposed voyage charter. Voyage Estimation is simply profit and loss calculation for the particular voyage in question that is arrived at by deducting all related expenses from total income.

In voyage charter, there are two (2) types of costs:

• Operating Costs : crew costs, repairs and maintenance, insurance, stores, lubes etc.
• Voyage Costs : bunker (fuel), port dues, dock dues, canal tolls etc.

In voyage charter, operating and voyage costs are paid for by the shipowner. Therefore, Voyage Estimation must take into account freight income and subtract all voyage-related expenses, including address commission and brokerage.

In voyage chartering negotiations, Voyage Estimation is an indispensable part that assists shipowners to assess the financial feasibility of a particular trip vis-a-vis alternative voyages that may be available and in relation to the amount of profit required as well as prevailing competing freight rates.

On the other hand, Voyage Estimation is used by charterers in order to evaluate the appropriate ship for an attempt to minimize the cost of the transportation services.

Alternative voyages may be offered to shipowner and each alternative needs to be estimated prior to negotiating and completing any chartering deal. Voyage Estimation must be performed as accurately as possible. Even tough, Voyage Estimation is an estimate, it gives a very good indication for the potential profitability of a particular voyage. Furthermore, Voyage Estimation may provide comparisons with a Time Charter Equivalent (TCE) charter. Time Charter Equivalent (TCE) estimate is a figure that denotes the daily hire that the ship will obtain if chartered on the particular voyage trip.

Process of Voyage Estimation : Voyage estimating is a process that takes into account the following factors:

• Cargo and Stowage Factor
• Ship Characteristics
• Time at Sea
• Time at Port (Loading and Discharging Operations)
• Time at Bunkering Port
• Bunker (Fuel) Costs
• Canal Costs
• Freight Income
• Operating Expenses
• Commissions (Address Commissions and Brokerages)
• TCE (Time Charter Equivalent)

Best Voyage Estimation Software

Voyage Estimation Software, we recommend Netpas Estimator  which is Powerful Voyage Estimation Calculator. Netpas Estimator  is an outstanding and practical voyage calculator for tramper business sector.  Netpas Estimator is an excellent voyage estimation software for most of the major types of tramper business such as Voyage, Cargo Relet and Time Charter. Netpas Estimator delivers practical voyage calculations and simulations to assist your Voyage Estimation straightforward and quick.

Shipbrokers can assist charterers anywhere and anytime with precise information. With  Netpas Estimator , Shipbrokers can simply create Voyage Estimation and save it on the computer. Shipbrokers can open the saved Voyage Estimation and find the information quickly. Furthermore,  Netpas Estimator  delivers useful function such as Estimation Analysis, Loadable Quantity, Freight Simulator, and many additional functions. For more information please check www.netpas.net

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