Chartering a product tanker: laytime, demurrage, and the voyage

Every cargo we sell has to cross water, and the moment it does, a clock starts. A product tanker costs tens of thousands of dollars a day to run, and the contract that governs who pays for that time is where a clean trade is won or lost. Get the charter party right and the voyage runs to plan. Get it wrong and a delay at the discharge port quietly eats the margin.

The charter party

The charter party is the contract between the cargo owner and the shipowner. For a single parcel of gasoil or jet moving from our supply chain to a buyer's terminal, we almost always take a voyage charter: we hire the ship for one defined trip, from a named load port to a named discharge port, at a freight rate quoted in dollars per tonne or against the Worldscale index. The shipowner keeps the crew, the insurance, the bunkers, and the running of the vessel. We buy the delivery.

The document reads dry, but every clause allocates a cost. The freight rate is only the headline. Underneath sit the terms that decide what happens when reality diverges from the plan: how long the ship will wait for free, who pays when it waits longer, which ports are acceptable, and what the vessel may carry on the leg before ours. A product tanker also has to arrive clean. The last three cargoes matter, because a tank that carried a dark or high-sulphur grade can contaminate a jet or a 10 ppm diesel parcel, so we set the prior-cargo requirement in the fixture and hold the owner to it.

Laytime and demurrage

Laytime is the amount of time the charterer is allowed, free of extra charge, to load and discharge the cargo. It is agreed up front, often 72 hours in total across both ports, and it starts counting once the vessel tenders notice of readiness and the agreed conditions are met. Pump the cargo inside that window and you owe nothing beyond the freight.

Run past it and you pay demurrage: a daily rate, fixed in the charter party, that compensates the owner for the ship sitting idle when it could be earning elsewhere. Demurrage on a clean product tanker can run from the high teens into the tens of thousands of dollars a day. If operations finish early, some fixtures pay the charterer despatch, usually at half the demurrage rate, as a reward for speed.

This is why the desk watches the berth, not just the price. A congested discharge port, a slow shore line, a customs hold, a bad-weather day that stops cargo operations: each one burns laytime, and once the free time is gone, the meter runs against us. We build expected port time into the economics before we fix the freight, and we keep the demurrage clause tight so a dispute later turns on the facts, not on the wording.

Freight is the price you agree. Demurrage is the price you pay for the hours you did not plan.

Managing the voyage

A fixed charter is the start, not the finish. From nomination to discharge, operations run the voyage against the contract, and small print becomes real money at the quay. A notice of readiness tendered an hour late, a shore tank that is not ready, a document that holds the vessel at anchorage: each is a line in the laytime calculation. The work breaks down into a few disciplines that decide the outcome.

• Vetting the vessel by age, class, inspection history, and prior cargoes, so the ship is fit for the product and acceptable to the receiving terminal.
• Coordinating the independent inspector at load and discharge, so quantity and quality are certified by SGS or an equivalent before title and payment move.
• Tracking laytime in real time and logging every pumping stop with its cause, so any demurrage claim rests on a clean statement of facts.

Our job is to make the voyage boring: to have the paperwork ready before the ship arrives and the buyer ready before she berths. A cargo that discharges on schedule is invisible. A cargo that does not becomes a claim, and claims are settled on the quality of the record we kept along the way.