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Hi. I am a shipping company director, transport academic, author, family man and all round nice guy. I have worked as shipbroker, shipowner, freight trader and bulk charterer, in senior positions, with some of the largest and most disrespected (joke) companies in the world. Ask my advice on all things shipping and you will receive my blunt and always honest answer. Hang around to learn more about chartering and ship broker salaries, chartering and ship broker jobs, chartering and shipbroker recruitment agencies, cheap freight, maritime education, chartering and ship broker qualifications, become a ship broker, tips on how to be a successful bulk shipping executive, philosophy, Zen and the art of shipbroking, and much more. Yours The Virtual Shipbroker (recently proclaimed the guru of shipbroking) Copyright © 2009-17 by Virtualshipbroker

Monday, January 24, 2011

voyage charter vs time charter question

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Good question

qte

Anonymous has left a new comment on your post "Readership growing":
I have a qn VS, hope to hear your view.

Why does voyage cargo always pay better than a time charter trip? Is it due to better control over the costs?

unqte

There is a huge assumption here that shipowners prefer voyage charters over time charterers because they ALWAYS pay better.

Anyone care to offer an explanation / comment?

VS

10 comments:

  1. Time charterer pays for bunker while owner bear the bunker cost for voyage cargo

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  2. Hi VS here

    Its a fairly complicated question that would need me (and you) to go itno and understand the way voyage estimation is done.

    Bottome line is this - Voyage charters by there nater are kind of like 'wholesale' deals. When a shipowner fixed a cargo on voyage he takes extra risks, makes more assumptions and expects higher return. Time charter on the other hand is low risk and this is factored into the price (or it should be).

    So putting on your shipowners hat - voyage charter = higher risk and supposedly higher margins. Time charter = lower risk and slightly smaller margins.

    Hope this helps

    Great Question

    The Virtual Shipbroker

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  3. weird off the head question, VS, do bankers make more than shipbrokers?

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  4. Generally I think Investment bankers probably on average make a little more. But IB is probably the highest paid profession going around. "master of the universe' stuff if you are good.

    Shipbrokings elite can make millions too! Probably just not as many.

    I have never made that much in a year. I have made usd 1 million in commission for the company but not in my pocket!

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  5. I believe that spot pays better due to the fact that it's shorter and more "uncertain". Let me also put it this way; if you buy more qns of the same product it is most likely that you re going to get a better offer than if you take only one unit of the same product.

    My opinion is that shipowners do not exactly prefer voyage charters over time charterers but that they use a mixture of spot and time charter. For example they time charter a 70-80% of their fleet and the rest in the spot market. This way they can minimise their financial exposure and in the same time take advantage of the market booms.

    Kind regards,
    E.B.

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  6. EB I think yu are getting mixed up between SPOT and Voyage. Spot just means NOW and spot can be both voyage charter or time charter.

    There is no right or wrong. I know many shipowners who only do Time Charter (greeks and a few others) and many who only do voyage. Most do a combination. Whatever the market dictates I reckon!

    Cheers
    VS

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  7. Dear VS, stumbled across this blog whilst googling 'address commission' and thought 'wow, now why didnt i think of doing that!'. I intend to be a regular visitor and poster!

    regarding the question of timecharter versus voyage, there is no doubt that the timecharter is potentially 'leaving money on the table' - which is what permits the role of Operator who will timecharter ships and fix business on voyage and hope to make some buckaroos in the middle.

    As has been mentioned above, the key element is the amount of risk involved. The voyage charterer may earn what appears to be a big juicy freight but gets penalised by rain and bad weather whilst the timecharterer just wakes up every morning to another day's hire in the bank!

    The voyage charterer must pay very close attention to cash flow - his ship may be waiting one month to load yet he will only receive the freight after loading completed, and the demurrage sometime thereafter. Meanwhile he must pay hire every 15 days to the owner from whom he has timechartered the vessel - not to mention having to pay hire in advance and a very substantial lumpsum for the bunkers upon taking delivery.

    A voyage charterer must have a keen understanding of all operational aspects of the trade he is involved in. This means having his own team of in-house experts and reliable locals on the ground. The Owner who deals only in timechartering out his ships can operate with just a broker and an accountant and has plenty of time on his hands to work out the best moment to buy or sell another ship.

    There are also the financial animals (such as publicly quoted companies on Nasdaq) who buy ships against long term period timecharter contracts - they have little interest in the daily excitement of moving cargoes around the globe. They just want to see a good (safe) return on capital. A period timecharter (to a first class charterer) is a bankable asset.

    and so on.......personally I prefer voyage business because it allows the broker to really exercise his profession and bring his skills to bear in a way which will enhance his principal's profit expectations. If we brokers just act as post boxes then our profession (like the physical postbox) is doomed to extinction !

    keep up the good work VS

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  8. great post crowsnest!

    VS

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  9. Hi)pls help not to mix up in fol:
    exporter has goods which he wants to ship from one port of New Zealand to 2-3 ports of Europe. One type of good is considering in this example. Pls comment which charter will be suitable either voyage or time charter? thanks in advance!

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  10. Hi,

    New Topic!!
    I have client who has a voyage charter party with a Time Charterer. The contract between the Voyage & Time Charterers are back to back with that with Time Charterer and Owners. The Time Charterer has got a Charterer's Liability Cover and I would like to know if the Voyage Charterer has to take a CL Cover as well.
    Thx.

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