You need a modern approach in operations when you are dealing with modern logistics solutions. A reliable solution can help you ship products or services from one location to another in the fastest possible manner. This is where shipbroking and ship chartering services help supply chain management companies and businesses equally.
To understand how the shipping industry works, it is important to know the difference between ship charterer and a shipbroker and their roles in the shipping process. The parties in the process include the ship owner, the cargo owner, the shipbroker, the charter party and a charterer.
So, what is the difference between a ship charter and a shipbroker?
A ship charterer is a crucial link in the entire shipping process. Their role is to choose the best route to move the cargo from one destination to another. It is the charterer who is responsible for calculating the actual or at least the estimated cost of shipping the cargo. They are also responsible for keeping the cargo and the crew safe during the entire journey. They are bound to follow the best cargo practices.
Shipping charterers play a major role in the transit of commodities for trade, mining & oil companies and grain houses. They ship vital elements from petrochemicals to aviation fuel to raw materials for industries like bauxite, phosphate, coal, iron, etc.
So, what is the role of shipbrokers in the entire shipping process?
The main role of shipbrokers is to align ship charterers with shipowners. Once this is done the shipbroker enters into an agreement with each party. This is called a fixture. The shipowner’s commission is based upon the gross freight or the revenue.
A shipbroker may be an independent company with market expertise or part of an institution. It is important for the broker to have enough knowledge of the market and different charter types.
It is equally important for the shipbroker to know the different types of charters. These are based on the cargo types which execute different functions. The main charter types are:
- Time charter
- Bareboat charter
- Voyage charter
When the shipowner hires out the ship to a charterer and enters into a contract for an agreed time, it is a Time Charter. In this case, fees are collected on a daily basis or on a monthly basis.
When the shipowner leases a ship and controls its commercial operations and covers its technical side, it is called Bareboat Charter.
When the shipowner hires out the ship to a charterer and enters into a contract for carrying an agreed amount of cargo, it is called a Voyage Charter. The fee for the load is calculated on the basis of the quantity of the load or in a lump sum manner.
From the perspective of a charterer, shipbroker or shipowner, many complexities are involved. It is important each has the knowledge and skills to cover their specific areas and perform their duties properly.
Sometimes there can be a chain of brokers working between two principals (shipowner/charterer).
A shipbroker may cover different areas of brokerage. That might include ship sales and purchase, tanker chartering, dry cargo and general purpose cargo. Normally, a shipbroker will tend to gain their expertise in one of these areas.
A good shipbroker with years’ of experience and skills will have an extensive database of contacts. They will also be aware of movements in the shipping market. They will have the power to understand and interpret market trends and identify opportunities for their clients.
A key difference between a ship charter and a shipbroker is that the charterer assumes liabilities and responsibilities for the ship, its crew, its cargo and its operations, while the shipbroker does not assume any liabilities and responsibilities. The parties who contract with the charterer, like the sub-charterer or stevedore view the charterer almost as the vessel owner itself. .
The shipbroker and ship charter play a very crucial role in the transportation of cargo. The way shipowners and cargo owners are connected makes the shipping process smoother. However, their roles are different, and understanding the difference is very important when embarking on international trade.