Ship Chartering FAQ

Ship chartering means hiring a ship, or space on it, to move goods by sea. The cargo owner (the charterer) agrees terms with a ship owner in a contract called a charter party. It sets the freight or hire, the cargo, the ports, and who pays for fuel, port costs, and cargo handling. Almost all dry bulk and breakbulk cargo moves this way, because these cargoes are too large or too irregular for scheduled liner services.

There are three main types. A voyage charter hires the ship for one set voyage at a freight rate per tonne. The owner keeps the operating costs and the risk. A time charter hires the ship for a period at a daily hire rate. The charterer decides where it trades and pays for fuel and port costs. A trip charter is a time charter for a single voyage. A bareboat charter is a separate, finance-style deal where the charterer takes the whole ship and crews it. It is rare in spot dry bulk trades.

Under a voyage charter, the owner pays for fuel, port charges, and the crew. You pay a freight rate per tonne of cargo. A time charter flips that split. You pay for fuel (bunkers) and port charges, and you pay the owner hire per day. The owner still pays for crew, maintenance, and insurance. The choice usually depends on your cargo. A single cargo points to a voyage charter. A programme of cargoes, where you want control of the ship, points to a time charter.

Voyage freight is priced per tonne of cargo. The price reflects the ship's daily running cost, the length of the voyage, fuel prices, port costs, and the balance of ships and cargoes on that route. Brokers build a voyage estimate that turns a daily ship cost into a per-tonne freight for your cargo and route. Time charters are priced as hire per day. Published benchmarks such as the Baltic Exchange indices track the market on the main routes. They give a reference point for a single fixture. The price of that fixture is still agreed between the two sides.

Laytime is the time the charter party allows for loading and discharging. It is agreed as a number of hours or days, or as a rate in tonnes per day. The charterer pays the owner demurrage if loading or discharge runs over the allowed laytime. Demurrage is a daily penalty for holding up the ship. The owner may pay the charterer despatch if the work finishes early, usually at half the demurrage rate. Most chartering disputes come from laytime and demurrage, so these clauses are drafted with care.

Laycan is the layday and cancelling window. It is the range of dates within which the ship must arrive at the load port and tender notice of readiness. The charterer need not start loading before the first layday, even if the ship arrives early. The charterer may cancel the charter if the ship has not arrived by the cancelling date. Laycan matches the ship's arrival to the date the cargo is ready. A tight laycan is a common point of negotiation.

A ship broker finds ships that suit your cargo. The broker negotiates the freight or hire and the charter party terms for you, and follows the fixture through to the end. The market is opaque and moves fast. A broker who fixes ships every day usually gets better terms than an occasional charterer negotiating alone.

A charter party is the contract between the ship owner and the charterer. It records the ship, the cargo, the load and discharge ports, the freight or hire, and the laytime and demurrage terms. It also sets who carries risks such as delay, weather, and war. Most fixtures start from a standard industry form, such as a BIMCO form or another recognised charter party. The two sides then amend it with negotiated rider clauses. The signed contract governs everything that follows, and a fixture recap often summarises it first.

A simple dry bulk fixture can come together in a day or two once the cargo details are firm. Brokers work an active market of open ships, meaning ships that are free for new business. Complex cargoes, tight laycans, or difficult ports take longer to match and negotiate. You get a wider choice of ships and a better price if you bring the cargo to a broker early. Start the conversation well before the cargo is ready to load.

The smallest mainstream ocean-going bulk carrier is the Handysize, at roughly 28,000 to 40,000 deadweight tonnes. A full cargo for one of those ships falls in that range. Smaller parcels can still move. They can go as part cargoes shared with other shippers, on smaller coasters and mini-bulkers, or in containers. The best choice depends on the commodity and the route. Tell us the parcel size and we will advise the most economical option.