Chartering (shipping)

Chartering is an activity within the shipping industry. In some cases a charterer may own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price, called freight rate. Freight rates may be on a per-ton basis over a certain route (e.g. for iron ore between Brazil and China), in Worldscale points (in case of oil tankers) or alternatively may be expressed in terms of a total sum - normally in U.S. dollars - per day for the agreed duration of the charter.

A charterer may also be a party without a cargo who takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate, or even makes a profit in a rising market by re-letting the ship out to other charterers.

Depending on the type of ship and the type of charter, normally a standard contract form called a charter party is used to record the exact rate, duration and terms agreed between the shipowner and the charterer.

Time Charter Equivalent is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types.

Charter types

(In the context of the leisure industry, the term "demise charter" will rarely be heard. Bareboat yacht chartering will typically be the short-term hire for only a few weeks or even less. Here, the owner will supply the yacht in seaworthy order, fully fuelled and possibly revictualled. The yacht may be hired as one of a flotilla; and at least one yacht may be manned by an employee of the owner. At the end of the hire period, the charterer will be expected to pay for the fuel used).

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Further reading

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