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Monday, March 4, 2013

Disaster - the Ships running late!

Ok - maybe 'disaster' is a slight overreaction. Having said that no-one likes a late ship..

So how does this play out in the real, cut and thrust, take no prisoners world of international shipping?

Charterers first - they need to give as wide a laycan (window for the ship to arrive) as possible. This needs to be negotiated in the sales contract and also with the port authorities and shippers in question. the greater the flexibility the less chance that a late ship will cause problems. Charterers also should insist on regular updates regarding the ships itinerary so that they can plan for the lateness (contingency planning). Sometimes shipowners are economical with the truth when there ship is running late. Charterers need to play hardball and even be in contact with ship agents at the previous ports in order to get a real idea as to the ships itinerary.

Shipowners - Need to be careful not to agree laycans that they know will be tough to meet. When it becomes obvious that a ship will be late - shipowners get scared. very scared....because the charterers now have lots of power. They can make the ship arrive at the port and then cancel the shipment if they so wish. So YES a late ship is ground for cancellation. Nothing worse for a shipowner to have a ship open Spot with no employment and the probability of no quick fix. I have seen ships miss a laycan, get cancelled and then wait 20 days (at 50 k per day thats ONE MILLION bucks) for a new cargo....Not nice!

So this is why you find that some shipowners tend to be economical with the truth when a ship is running late. They will tell you that everything is fine and then at the last moment drop the bomb that an 'unexpected' delay has occurred at the last possible moment and hence the ship is now running late.

They do this because the later it becomes apparent that a ship is running late - the less the time for the charterer to find a substitute vessel....leaving the charterer stuck and the shipowner still with a contract despite there being grounds for cancellation.

So there you have it - when a ship runs late charterers would like to know asap and shipowners just dont wanna tell them! Fun hey?

Shipowners aren't always the bad guys. i have seen charterers use 'selective' information for evil as well.

Your VS


  1. Could this not be avoided by the Charter simply insisting that the selected vessel commenced Sat-C polling from the time of fixing the contract?
    Also, presumably AIS tracking can be quite useful in monitoring a vessels progress, particularly when coupled with known transit times of canals and the like?

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  3. Dear VS

    First of all, congratulations for your excellent job. A great guide!

    A few points of interest: If the lady in question misses her laycan, the charterer can of course exercise his contractual right to cancel, but he will not have any right to claim damages. Assuming he can establish an independent breach by the owner of some other provision of the charter, the situation changes.

    Further, even if it is crystal clear to both parties that the ship has no chance of arriving at the load port in time, and the charterer elects to cancel early in anticipation of the vessel's late arrival, he may himself be in breach of contract.

    Whether under those circumstances, the owner can recover damages is of course (again) another question, since, if the charterer can establish that he could and would have exercised his right of cancellation anyway, then the owner may be unable to establish any loss.

    Practically speaking, when it’s 100% clear to both parties that the vessel will not be within the laycan, they will often reach an agreement to cancel, prior to the cancelling date, saving time and money.

    In this context is drafted the clause 9b on Gencon:

    "Should the Owners anticipate that, despite the exercise of due diligence, the Vessel will not be ready to load by the cancelling date, they shall notify the Charterers thereof without delay stating the expected date of the Vessel's readiness to load and asking whether the Charterers will exercise their option of cancelling the Charter Party, or agree to a new cancelling date.
    Such option must be declared by the Charterers within 48 running hours after the receipt of the Owners' notice. If the charterers do not exercise their option of cancelling, then this Charter Party shall be deemed to be amended such that the seventh day after the new readiness date stated in the Owners' notification to the Charterers shall be the new cancelling date ..."

    In any case, a shipowner would have to think twice about his intentions to be “economical with the truth”, since the above clause (9b) of the Gencon form appears to be mandatory. Will the owners therefore be liable in damages if, for example, they delay in giving the required notice, as a result of which the charterers miss an opportunity to charter in a lower priced replacement vessel?

    The question remains, and they are big boys anyway.

    My best wishes

  4. Hi Team

    Some great points and yes there are now a few strategies charterers have in order to have more information regarding a ships whereabouts. The problem is many charterers dont realise they have every right to ask for meaningful and correct information.

    Hi Nikos

    From algal point of view you are quite correct. Charterers onlty real recourse is to cancel the ship if its missing laycan. But the n there is the 'trading' point of view. And this right to 'cancel' is quite a powerful right especially if a substitute ship that is also cheaper has all of a sudden popped up. It may also be the case that if the market drop significantly charterers will drop the late ship and it makes economic sense to hang around for a week or so to wait for a slightly later substitute (and pay whatever carrying charges to the shippers that may be necessary).

    As far as owner lying about vessels positions - if it happens it is done with the utmost of care....lol. Also charterers are reluctant to escalate any issue regarding false notices due to the time and cost of chasing outcomes through the court. Having said that if the damage is high (as a result of false information) then anything is possible.

    When representing various mining companies, if i suspected some foul play with regards to vessel itiniraries I just send off a fairly abrupt, semi threatening letter reminding them of their obligations and possible outvcomes of any breach.


  5. Dear VS,

    I can only agree. A shipowner who considers playing the game, has to know the (unwritten) rules.

    Being a shipowner for a couple of years, I know what you mean…

    All best