Deadfreight Calculation and Example

In dry bulk chartering, Deadfreight Calculation and Example:

Captain (Master) declares ship can load: 52,000 mtons
Charterers supply: 50,000 mtons
Freight rate: $50 per mton
Shipowners will invoice for a total of 52,000 mtons as follows:
Freight (on cargo loaded) 50,000mt x $50 per mton = $2,500,000
Deadfreight (on cargo not supplied)
2,000 mtons x $50 per mton = $100,000
Total = $2,600,000

In tanker chartering, cargo quantity is often described as a minimum quantity with charterers having the option to load up to a full cargo. In order to reduce the charterer’s risk of paying deadfreight a clause such as follows may be agreed in tanker chartering:

“Minimum 50,000 mtons, charterers option up to full cargo, no deadfreight for charterers account provided minimum quantity supplied”

Captain (Master) calls for 52,000 mtons. But, charterers able to supply only 50,000 mtons is supplied, no deadfreight is payable because the minimum cargo has been supplied. If charterers had supplied less than minimum according to clause in chater party, for example 48,000 mton is loaded, then deadfreight would be payable on the 2,000 mton shortfall.

In the tanker chartering, if a minimum cargo quantity has been agreed, for example:

“minimum 150,000 mtons, 1-2 grades no heat crude oil, within ship’s natural segregation, charterers option up to full cargo, no deadfreight for charterers account provided minimum quantity supplied.”

Tanker chartering freight calculation there is phrase: overage at 50%. For example, freight payment clause states: “Freight WS120, overage at 50%”. If a tanker is loaded 160,000 mtons of cargo, the freight on 150,000 mtons will be at WS120, in other words 120% of the Worldscale Flat Rate, and the freight on the overage, in this example 10,000 mtons, will be at 50% of WS120, in this example WS60. Assume that tanker Flat Rate is $20 per mton, the freight is calculated on the quantity loaded as follows:

Flat Rate $20 per mton
WS120 = $24 per mton
WS60 = $12 per mton
Tanker Rate Payable: $24 per mton x 150,000 mtons = $3,600,000
Overage Payable: $12 per mton x 10,000 mtons = $120,000
Total Tanker Freight Payable = $3,720,000

Fundamental reason to add overage at 50% is probably to encourage the charterer to supply more cargo if that can be arranged. Charterer has the benefit of a reduced freight rate on the additional cargo and shipowner will earn additional freight over the minimum originally anticipated. Carrier must take care when it appears that all the cargo will not be provided by the shippers, leading to the possibility of a deadfreight claim. Charterer must be made aware of the situation, so that more cargo can be produced from another source. If possible, captain (master) of the tanker should enter a remark on the Bills of Lading (B/L), to the effect that deadfreight will be payable. Hence, a third party Bills of Lading (B/L) holder, who may be paying the tanker freight, will be aware that freight will be payable on a quantity greater than that shown on the Bills of Lading (B/L).