Home /Knowledge/ Voyage Charter or Time Charter?
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Date: 12/06/2013
Voyage Charter or Time Charter?

Voyage Charter or Time Charter?

There are many different reasons which influence a charterer's decision as to whether to charter on a voyage basis or to take ships on time charter.

Voyage charter advantage

Voyage charter gives the charterer a fixed price per ton of material and passes almost all the risks, especially risks of delays due to bad weather, strikes etc onto the shoulders of the shipowner. The charterer does, however, have to pay for the privilege of being risk-free.



Time Charter advantage

Time charter gives the charterer considerable flexibility as to where to send the ship and is spared the problems of demurrage. Time charter does, however, mean that if bad weather delays the ship or if workers in a chosen port decide to strike, the daily rate of hire still has to be paid.


Incidentally if the delay is caused through the ship breaking down, then hire is not payable; the ship goes off-hire. As the charterer assumes many of the owner's risks and costs, the equivalent amount paid to the owner per ton of cargo carried is less than for a voyage contract.


Choosing voyage or time charter

Thus, if the charterer has a single commodity from one or a limited number of loading places to go to a single or limited number of discharging places, and the rates of loading and discharging are well established, then voyage charter is the obvious choice.


If, however, the charterer has many different commodities from/to a variety of places so complex that it would be difficult if not impossible to include them all in a voyage charter, then time charter is a better idea. This is typified by time charter on a 'trip' basis where one could well see the business being quoted "Delivery Kobe, trip across Far East/West Coast North America redelivery Los Angeles - Vancouver Range expected duration 90 days"


Another regular reason for time chartering is when a liner company seeks temporarily to supplement its own fleet in order to cope with a seasonal increase in business. Time charter is often regularly used by container lines to cater for their 'feeder' business and there is a whole segment of the market devoted to relatively small container ships to fill the requirements of the feeder industry.



There are even speculators who think that they can trade ships more profitably than the owners themselves and will take ships on time charter and then re-let them on a voyage basis hoping to make a substantial profit between the cost of the time charter and the income from the voyage charter.


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