What chartering is

Chartering is the hire of a vessel, or of space on it, from a shipowner to a charterer. The contract that records the deal is the charterparty, and it sets out the cargo, the route, the money and — most importantly — which side carries each cost and each delay risk. Deals are usually put together by shipbrokers who match cargo enquiries with open tonnage.

The main charter types

  • Voyage charter — the owner carries a stated cargo between named ports for a freight rate, usually per tonne or as a lump sum. The owner pays voyage costs: bunkers, port charges and canal dues.
  • Time charter — the charterer hires the vessel and its crew for a period, paying hire per day. The charterer directs commercial employment and pays bunkers and port costs; the owner keeps the vessel operational.
  • Bareboat (demise) charter — the charterer takes the vessel without crew and effectively operates it as owner for the period, carrying almost every operating risk.
  • Contract of affreightment — a commitment to move a volume of cargo over a period across multiple shipments, with the owner choosing the tonnage.

How freight rates are set

Rates are a function of tonne-mile demand against available tonnage in the right place at the right time. Dry bulk fixtures are commonly benchmarked against published route indices, while tanker business is frequently quoted in Worldscale points converted to a dollar figure per tonne. Owners compare a voyage's expected earnings as a time charter equivalent — voyage revenue less voyage costs, spread across the days the voyage takes — so that a spot fixture can be judged against a period deal.

Laytime and demurrage

A voyage charter allows the charterer a fixed number of hours to load and discharge. That allowance is laytime, and it begins once a valid notice of readiness is tendered and any agreed turn time has run. Time used beyond the allowance is demurrage, payable by the charterer at a daily rate; time saved may earn despatch. Disputes in chartering are far more often about laytime counting than about the freight rate itself.

Charterparty terms that matter

  • Standard forms — most fixtures start from an industry form such as GENCON for dry voyage business, ASBATANKVOY for tankers or NYPE for time charters, amended by a rider clause set.
  • Off-hire — in a time charter, periods when the vessel cannot perform stop hire running.
  • Speed and consumption warranties — the performance the owner guarantees, and the basis for underperformance claims.
  • Safe port and berth — the charterer's promise that the nominated port can be reached and left safely by that vessel.
  • Bunker clauses — who supplies fuel, at what quantity on delivery and redelivery, and who bears the cost of compliant grades.

How a fixture comes together

A charterer circulates a cargo enquiry, brokers report the open positions that fit, and the parties exchange offers on main terms: vessel description, dates, ports, rate, laytime and demurrage. When main terms are agreed the deal is fixed on subjects — typically management or receivers' approval — and only becomes binding once those subjects are lifted. Recap messages then record what was agreed before the full charterparty is drawn up.

Risks charterers and owners watch

Counterparty credit is the first exposure on both sides, since freight and hire are paid against performance. Beyond that, owners watch port congestion and idle days, while charterers watch bunker price movements, sanctions and compliance screening, and the cost of deviation when a routing changes mid-voyage.

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