Chartering

Chartering is an activity within the shipping industry whereby a shipowner hires out the use of their vessel to a charterer. The contract between the parties is called a charterparty (from the French “charte partie”, or “parted document”). The three main types of charter are: demise charter, voyage charter, and time charter.

In some cases a charterer may own cargo and employ a shipbroker to find a ship to deliver the cargo for a certain price, called freight rate.

A charterer may also be a party without a cargo who takes a vessel on charter for a specified period from the owner and then trades the ship to carry cargoes at a profit above the hire rate, or even makes a profit in a rising market by re-letting the ship out to other charterers.

Depending on the type of ship and the type of charter, normally a standard contract form called a charter party is used to record the exact rate, duration and terms agreed between the shipowner and the charterer.

Time charter equivalent is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance despite changes in the mix of charter types.