Who is?

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

Thursday, August 9, 2012

Difference between a "charterer" and a "shipper".

A question has come up with my latest group of brilliant students partaking in the popular VS DRY CARGO CHARTERING AND SHIPBROKING CERTIFICATE.
 
There was some confusion between the terms 'charterer' and 'shipper' - specifically when talking about the idea of 'deadfreight'.
 
To make things simple - the first distinction I need to state is that as a shipbroker and dry dry cargo shipping specialists contracts are always between 'charterers' and 'shipowners'. In other words for the purpose of a contract the word 'shipper' is irrelevant. Many think they can use the word 'shipper' and 'charterer' in substitution but you cannot. Shipper is not a word we use when discussing the commercial aspects a charter agreement.
 
Lets break it down...
 
A shipper is the party who supplies the raw materials to be shipped. They may or may not be the charterer.
 
EG...An African Mine sells it minerals to China. The Chinese customer buys basis fob and hence arranges the shipping.
 
Who is the charterer? Answer........The Chinese mine
Who is the shipper? Answer...........the African mine.
 
So in the charterparty the contract is between the Chinese mine (as the charterer) and the shipowner. The African mine is not a signatory to the shipping contract.
 
What complicates things a little is that in many cases the shipper is 'also' the charterer
 
EG An African mine sells it minerals to China. The Chinese client buys CNF and hence leaves the Africans to arrange the shipping. In this case the African mine is both the Shipper and the Charterer.
 
These distinctions can get even more complicated. Consider this scenario.
 
  • African mine produces the minerals
  • African mine has marketing agreement with large trading house eg Bunge which agrees to buy and sell all of the mines product on an exclusive basis
  • Bunge sells the minerals CNF to Chinese Trading house (bunge organises the freight)
  • Bunge is now the charterer and engages the services of a shipowner.
  • Prior to ship arriving in China - Chinese trading house then sells the product to final user of the mineral (could be a steel company for example).
 
Above highlights the complicated nature of commodity transactions. But i like to keep things simple. Good rule for young shipbrokers.....avoid using the word shipper and only use the word 'charterer' when talking about the company that controls the cargo!
 
Hope this explains....if there are any questions then shoot!
 
VS

12 comments:

  1. Hi vs,

    Thanks for creating a nice blog like this. I am aspire to be a shipbroker, so would like to ask your advice how is my chance to be come one. I am from Singapore just graduated from nanyang technological university holding a bachelor in mechanical Engineering with honors. Despite having an engineering degree, I manage to enter PSA international as their operation executive as a ship planning in charge. Do u think my experience with psa will benefits me when I applying for trainee shipbroker next year?

    ReplyDelete
  2. Hi, off topic but i am a student currently taking Bsc Politics at Southampton Univierstiy and was wondering what your advice was on the best on the best way to get into shipbroking?
    Reguards

    ReplyDelete
  3. josh, look through the blog.. this has been answered countless times.. do some research and i'm sure you'll get your foot int the door..

    ReplyDelete
  4. Hi josh,
    I am also a student at Southampton uni and wish to become a shipbroker as well.
    That could be interesting if we could exchange some ideas about the shipping world...

    ReplyDelete
  5. VS!

    Question, I find it a little confusing how the information channel works in the shipbroking world. I get that orders are circulated via emails but when a broker finds something of interest - will the broker then take the order and circulate it further to his 'own'/personal network in order to see if there's a match? Hope you can clarify this for me. Thanks

    ReplyDelete
    Replies
    1. Thanks heaps for your fast reply VS!

      One more quick question if you may:

      In terms of the information channel, will different Cargoes/ships-open be accessible only on certain internal email servers, eg. SSY's internal email-system resulting in other broking-firms never seeing a specific order? In other words do charteres & shipowners blast out their information to every single shipbroker in the world or only selected ones...?

      Thanks again

      Delete
    2. Information is currency. SSY and and other shipbroker for that matter will guard their clients with their lives.

      If you need more explanation you should read 'starting and shipbroking business'. Shipbroking is more than just matching cargoes with ships - its about protecting revenue, making sure your competition dont pinch your business, and protecting the privacy of your clients.

      Shipping is a game of smoke and mirrors...
      Not everything is as it seems.

      Cheers
      VS

      Delete
  6. Hi

    If an order comes from a brokers direct charterer then he/she will send this order to just about anyone on his circulation list.

    If an order comes from another broker (and indirect charterer) he/she will only send this order to direct shipowners and operators.

    There is no point sending orders or ships from other brokers to another broker.....too many commissions involved (ie you / shipowners broker and then charterers broker - makes 3 brokers and 3 broker commissions)........deals like this never get done because there will always be a more direct channel and the shipownerw ill not want to pay too many commissions.

    Hope this explains

    VS

    ReplyDelete
  7. Dear VS: what's the difference between Ship brokering and Ship chartering?

    ReplyDelete
  8. They are similar. Brokering is the intermediary service. Chartering is the act of buying or selling the shipping service. So the broker helps with the chartering process.

    Ship broking is also a generic term used to describe the entire industry.

    ReplyDelete
  9. Extremely clear explanation. It is a lifesaver! THANK YOU

    ReplyDelete