Cargo ships employment in the charter markets

Cargo ships employment in the charter markets

Defining charter markets

Where a ship is employed in the charter markets (sometimes known as the “tramp trades”), the owner generally intends that she will be “fixed” by shipbrokers on a succession of charters. The ship may be employed in the voyage charter market (also called the “spot market”) or in the time charter market, and in both cases may be sub-chartered by the “head charterer” to another charterer. The ship may simultaneously be employed under a contract of affreightment . As a “tramp”, the ship will not normally operate on a fixed route to an advertised schedule, except when time-chartered to a liner operator.

Most ships employed in the charter markets are dry bulk carriers, tankers, combination carriers (e.g. OBOs), or reefer vessels, although there is also a charter market for container ships and for vessels of various special purpose types .

A chartered ship’s charterers may be time charterers or voyage charterers, and will normally employ the services of a shipbroker to fix the ship . The charterers may in some cases be the legal carrier , in which case they may order the ship to issue bills of lading on their behalf to shippers of goods loaded. The charterers may be carrying their own goods in an “in house” shipment, or the goods of another party. In other cases the charterers may only be hired to fix the ship and load the cargo.

Dry bulk carrier market categories

For charter marketing purposes, dry bulk carriers are categorised by owners, charterers and brokers, and in market reports, as outlined below.

i) Handysize bulk carriers are vessels in the range10,000-29,999 dwt.
ii) Handymax bulk carriers are vessels in the range 30,000-49,999 dwt.
iii) Panamax bulk carriers are vessels in the range 50,000-79,999 dwt.
iv) Capesize bulk carriers are vessels of 80,000 dwt or more.

A good example of a dry bulk shipping market report can be seen on the website of
E.A.Gibson Shipbrokers Ltd

Tanker market categories

* For charter marketing purposes, tankers are categorised (by owners, charterers and brokers, and in market reports) as outlined below.

i) Handysize tankers are vessels in the range 27,000-36,999 dwt.
ii) Handymax tankers are vessels in the range 37,000-49,999 dwt.
iii) Panamax tankers are vessels in the range 50,000-74,999 dwt.

The London Tanker Brokers’ Panel determine market rates under a freight billing system called “Average Freight Rate Assessment” or “AFRA”. This allows an assessment to be made of a freight scale for tankers of various sizes,

Aframax tankers are vessels large enough to carry “Aframax”-size cargoes of between 80,000 tonnes and 119,000 tonnes. The average size of Aframax cargoes varies from one world region to another, resulting in different tanker market practitioners quoting different sizes for an “Aframax” tanker.

* A Suezmax tanker is a vessel of such a size (around 150,000-200,000 dwt, depending on dimensions and draught) that she can sail through the Suez Canal when fully loaded. Some brokers categorise “Suezmax” tankers as vessels in the range 120,000-199,999 dwt.

Fixing of cargo ships on charter - Role of shipbrokers -Who are shipbrokers?

Ships are normally “fixed” on charters arranged between the shipowner and charterer by shipbrokers acting as negotiators for the two parties. Shipbrokers include:

• owners’ brokers, who find and arrange employment for their principals’ ships;
• charterers’ brokers (or “chartering brokers”) who find ships to carry out their principals’ requirements;
• tanker brokers, who arrange oil cargo fixtures in the specialist tanker market;
• liner brokers and liner agents, who find cargoes for liner owners and operators;
• coasting brokers, who work in the short sea market and often combine the functions of owners’ and charterers’ brokers;
• ships’ agents, who are employed by shipowners and charterers to service their vessels’ needs in ports; and
• sale and purchase brokers, who buy and sell ships and can, if required, arrange newbuilding contracts for their principals.

Many shipbrokers are self-employed, while others work in large firms active in several of the above disciplines. The chief stages in the fixing process include:

1. Circulation by the charterers’ broker of “cargo orders”, outlining charterers’ forthcoming cargo transportation requirements.

2. Circulation by the owners’ broker of “position lists” or “tonnage lists”, detailing expected “open” dates and positions of available ships.

3. Study of market reports by brokers.

4. Negotiations on main terms between brokers on behalf of their respective principals, with offers and counteroffers by either side; if main terms cannot be resolved, there is little or no point in negotiating further details.

5. Negotations “on subjects”, e.g. “subject stem”, “subject receiver’s approval”, etc., where the main terms have been agreed, but final agreement is subject to various secondary conditions being agreed.

6. Fixture, i.e. the full and final agreement, with all “subjects” removed.

Following fixture is a “post-fixture” or follow-up period during which the broker may undertake various administrative functions on behalf of his principal, such as (in some cases) collection of freight or hire.

Shipbrokers are remunerated by commission, called “brokerage”, payable by the shipowner to each broker involved in arranging a contract. In voyage or time charters the brokerage payable is stipulated in a Brokerage Clause and is normally 1.25% of the shipowner’s gross receipts from hire, freight, deadfreight and demurrage, payable to each broker involved. (It is not uncommon to see a total brokerage figure of 3.75% or 5% in a charter party.)

The professional body for shipbrokers world-wide is the London-based Institute of Chartered Shipbrokers, whose motto is “Our Word, Our Bond”. The Institute sets and monitors professional standards for shipbrokers through annual examinations. Its TutorShip correspondence courses enable shipbroking students (including serving mariners) to study for the Institute’s annual exams (from which qualified mariners are usually granted some exemptions).

Institute of Chartered Shipbrokers
3 St Helen’s Place, London EC3A 6EJ.
Tel. 020 7628 5559. Fax. 020 7628 5445.
TutorShip e-mail: tutorship@ics.org.uk
Institute of Chartered Shipbrokers website www.ics.org.uk

Summarized below seagoing cargo ship various employment guide:

Charty party forms

Cargo ships employment in the charter markets

Machinery system main info pages