ECSA - The Tramp Shipping Market Mar 2015

ECSA
The Tramp Shipping Market
9.1 Negotiating & concluding a freight contract
When a ship is chartered or a freight rate is agreed, the ship is said to be `fixed'. Fixtures are
arranged in much the same way as any major international hiring or subcontracting operation.
Shipowners have vessels for hire, charterers have cargo to transport, and brokers puts the deal
together. Let us briefly consider the part played by each of these:
The shipowner comes to the market with a ship available, free of cargo. For example, it may be a
Panamax bulk carrier currently on a voyage from the US Gulf to deliver grain to Japan, so it will
be `open' (available for hire) in Japan from the anticipated date at which the grain has been
discharged, say 12 May.
The shipper has a volume of cargo to transport from one location to another. The quantity, timing
and physical characteristics of the cargo will determine the type of shipping contract required. For
example, the shipper may have a cargo of 70,000 tons of coal to ship from Banjamarsin,
Indonesia to Rotterdam. Such a cargo might be very attractive to a bulk carrier operator
discharging coal in Northern China and looking for a cargo to reposition into the North Atlantic,
because he has only a short ballast leg from China to Indonesia and then a full cargo back to
Europe.
Most often the principal (i.e. the shipowner or charterer) will appoint a shipbroker to act for him.
The broker's task is to discover what cargoes or ships are available; what the owners/ charterers
want to be paid; and what is reasonable given the state of the market. With this information they
negotiate the deal for their client, often in tense competition with other brokers. Brokers provide
other services including post fixture processing, dealing with disputes, and providing accounting
services in respect of freight, other payments and receipts under the charter, etc. Some owners or
shippers carry out these tasks themselves. However, this requires a staff and management
structure which only very large companies can justify. Since broking is all about information,
brokers tend to gather in shipping centres. London remains the biggest, with other major centres
in New York, Tokyo, Hong Kong, Singapore, Piraeus, Oslo, Hamburg, Copenhagen, Bergen etc.
Three types of contractual arrangement are commonly used. Under a voyage charter, the
shipowner contracts to carry a specific cargo in a specific ship for a negotiated price per ton.
Variants on the theme are the consecutive voyage charter and the contract of affreightment, in
which the shipowner contracts to carry regular tonnages of cargo for an agreed price per ton.
9.2 The voyage charter
A voyage charter provides transport for a specific cargo from port A to port B for a fixed price
per ton, so in this case the shipowner pays all the costs relating to the ship. For example, a grain
trader may have 49,000 tons of grain to transport from Mobile in the US Gulf to Chiba in Japan.
So what does he do? He calls his broker and tells him that he needs transport for the cargo. The
broker will `fix' (i.e. charter) a ship for the voyage at a negotiated freight rate per ton of cargo,
e.g. $25.20. The terms will be set out in a charter-party and, if all goes well, the ship arrives on
the due date, loads the cargo, transports it to Chiba, discharges and the transaction is complete.
If the voyage is not completed within the terms of charter-party then there will be a claim. For
example, if laytime (i.e. port time) at Chiba is specified at seven days and the time counted in port
is ten days, the owner submits a claim for three days demurrage to the charterer. Conversely, if
the ship spends only five days in port, the charterer will submit a claim for two days despatch to
the owner. The rates for demurrage and despatch are stated in dollars per day in the charter-party.
9.3 The Consecutive Voyage Charter (CVC)
A Consecutive Voyage Charter is similar to a Voyage Charter, but the ship is contracted to
undertake a series of cargo carrying voyages on a defined route. This is used when the shipper
Clarkson Research Services Limited 28 March 2015