Timechartering Estimation

As the practice of charterers taking vessels on timecharter for trips has become widespread, the need has arisen to estimate the daily profit of this type of employment in the same manner as for voyage charters in order to compare the two alternatives. Lesson Five, in fact, showed how to compare timecharter rates expressed in terms of a daily amount with those shown as per summer deadweight tonne. Many merchants prefer the relative simplicity of voyage chartering, not having the organisation to enable them successfully to operate timechartered vessels. There are others, however, who frequently employ vessels on timecharter trips as an alternative, where they calculate a saving in overall costs. Consequently, it is vital to be able to estimate the real ‘nett’ cost of timechartering and compare it with the voyage chartering alternative. Fortunately, trip timechartering estimation is a relatively straightforward exercise; in many cases it being necessary only to deduct commission and brokerage from the gross daily hire for a ready comparison with an alternative voyage result. Care must be exercised, however, over items such as domestic fuel costs, hold cleaning payments, bunker price differentials, etc. where these are not totally realistic. The real problems arise with timecharter estimating, where a vessel is not taken on hire immediately after her previous employment, and allowance has then to be made not only for the time lost to her owners whilst the vessel is unemployed, but also for bunkers consumed during that period. Even here, the resulting calculation is not difficult if total income and expenditure is considered carefully and applied to the number of days for the entire venture. Depending on the strength or weakness of the freight market, a charterer may pay an owner a ‘ballast bonus’ towards the expenses of positioning a vessel for delivery on to a timecharter or, very occasionally, for redelivery a vessel in an unattractive position, facing the ship owner with a ballast voyage to regain a place where suitable employment can be obtained.