Great question!
Quote
Hi VS,
I am a fan of your wonderful blog.
Also brought one of your books "Shipbrokers Fasttrack" which was very informative and useful when I worked for a broking firm.
Presently, I work for a Charterer and I have 3 questions for you.
Why Despatch is half of Demurrage ?
Why not same as Demurrage ?
What is the logic behind Half of Demurrage ?
Thanks,
Best Regards
AC
Unqte
Who can answer???
Cmon - join in!
Hi VS wouldn't mind having a go at answering this question.
ReplyDeleteLogic of half despatch
It's typical question for a Charterer :-)
The logic from the Charterers point of view is that since they(the charterer) finished ahead of time and within the agreed time window for loading and/or discharging they should be entitled to a piece of the profit the owner would make having its vessel ahead of the anticipated laytime.
However since the owners will not divulge their operating costs it will be difficult to determing his(the owners) profit/loss by the saving of one day or number of days.
The owners on the other hand will argue that they have performed the voyage as agreed and the charterers margin will remain intact regardless whether they finished ahead of the allowed laytime or not, owners will also point out that a every day saved also means a saving of stevedoring costs for the Charterers. So the logic from the owners is 'why should I share my profit (or decrease in loss) with you?"
So in order to end the discussions both parties seek a fair split and usually agree on 50% or half depatch.
Did you know that in the tanker trade there is NO despatch of Free Despatch as it is commonly referred to? Also a lot of shortsea business is concluded on Free Despatch terms.
Hope this helps.
Obviously this is only my personal opinion it could be that you (VS) see another reason/logic for the halfd despatch
Jp - an excellent answer. In fact I can tell you I often fix no despatch in dry cargo situations. We need to remember that Demurrage is 'damages' for keeping a ship longer then it should. It is not a reward for staying longer. Despatch on the other hand is a small reward to the charterers for doing things quicker but as JP said the charterers results should already be locked in and shipowners are merely doing as is requested from them.
ReplyDeleteNice discussion - if anyone else wants to add something please feel free.
Fully agree with Jean.
ReplyDeleteHowever, from my perspective as a Chartering broker working for an Owner, I see the things this way:
Charterer's logic is not completely accurate. First and foremost, the Owner is absorbing a lot of navigational and force majeure risks for the duration of every single voyage. An Owner would say that those who bear risks shall be entitled to the potential benefits. For example, pretty often , in case of port congestions, the port authorities would push the stevedores to complete the vessel quicker, something that the Charterers/Receivers should take no credit for. Conversely, if the vessel gets stuck into congestion, it is the Owner who suffers, doesn't he?
Especially at loading port, an Owner won't be very impressed regarding the saved time, there are plenty of possibilities where he will lose time. Imagine the vessel arrives at the disch port on Friday 20:00 with sshex discharging terms.
In this regard, when it comes to discharging, Owners would profit from the saved time only in case they are able to utilize this time, i.e. to have the vessel employed earlier. Pretty often the vessel remains idle till the beginning of the previously negotiated new voyage, so for the Owner it is all the same, and in some cases the Owner would even prefer to have the vessel berthed and sheltered.
What I am also thinking is that in case of a CIF contract, ofter the Receiver (who is not necessarily the Charterer) covers the discharge costs. Why should the Charterer benefit, in case they have already included the freight into the sales contract. Not to mention that sometimes the broker in between claims the despatch(or demurrage) on behalf of the Charterers/Owners without their knowledge. Guess who keeps the change.
Of course, just my personal opinion. Great discussion though.
Many thanks to VS. His books really helped me find a job in Chartering. Just read carefully. Though I am still waiting for a long promised personal advice from him :)
Excellent post Dimas...
ReplyDeleteOuch about long promised personal advice...did I?
Ill check my emails. With approx 13,000 hits per month and a few hundred emails - I miss a few...
VS