Hire Calculations

Hire calculations in commercial shipping

Hire calculations in commercial shipping are used to determine the amount of money that a charterer will pay to a shipowner for the use of a ship for a specific period of time. There are two main types of hire calculations: voyage hire and time charter hire.

Voyage hire is calculated based on the amount of cargo that is transported and the distance that it is traveled. The freight rate is typically negotiated in advance and is expressed in terms of dollars per ton or dollars per cubic meter. The total hire amount is calculated by multiplying the freight rate by the amount of cargo that is transported.

Time charter hire is calculated based on the amount of time that the charterer has the use of the ship, regardless of the amount of cargo that is transported or the distance that it is traveled. The time charter rate is typically negotiated in advance and is expressed in terms of dollars per day. The total hire amount is calculated by multiplying the time charter rate by the number of days that the charterer has the use of the ship.

Here are some of the factors that can affect the freight rate and time charter rate:

• Type of ship: The type of ship can have a significant impact on the freight rate and time charter rate. For example, a tanker will typically command a higher freight rate and time charter rate than a dry bulk carrier.
• Size of the ship: Larger ships typically command a higher freight rate and time charter rate than smaller ships. This is because larger ships are more efficient and can transport more cargo.
• Age of the ship: Newer ships typically command a higher freight rate and time charter rate than older ships. This is because newer ships are more fuel-efficient and have less downtime for maintenance.
• Condition of the ship: Ships in good condition typically command a higher freight rate and time charter rate than ships in poor condition.
• Trade route: The trade route can also affect the freight rate and time charter rate. Trade routes with high demand for shipping services will typically have higher freight rates and time charter rates.
• Market conditions: The overall market conditions can also affect the freight rate and time charter rate. When the demand for shipping services is high, freight rates and time charter rates will typically increase. Conversely, when the demand for shipping services is low, freight rates and time charter rates will typically decrease.

In addition to the basic hire calculation, there may be a number of other factors that can affect the total hire amount, such as:

• Loading and discharging costs: These costs are typically borne by the charterer, but they may be included in the hire rate or negotiated separately.
• Port costs: These costs, such as pilotage and dockage fees, are typically borne by the shipowner.
• Bunker adjustment factor (BAF): This is a surcharge that is added to the hire rate to cover the cost of fuel.
• Speed premium: This is a bonus that is paid to the shipowner if the ship sails at a faster speed than was agreed upon in the charter party.
• Demurrage: This is a charge that is paid to the shipowner for each day that the charterer exceeds the agreed-upon laytime for loading and discharging the cargo.

Hire calculations in different types of charter parties

The method of calculating hire can vary depending on the type of charter party. For example, in a voyage charter party, the hire is typically calculated based on the amount of cargo that is transported and the distance that it is traveled. In a time charter party, the hire is typically calculated based on the amount of time that the charterer has the use of the ship.

Here are some examples of how hire is calculated in different types of charter parties:

• Voyage charter party: A charterer books a bulk carrier to transport 100,000 tons of wheat from Brazil to China. The freight rate is $10 per ton. The loading and discharging costs are estimated to be $2 per ton. The total hire amount would be calculated as follows:

Freight rate: $10 per ton
Amount of cargo: 100,000 tons
Loading and discharging costs: $2 per ton
Total hire amount: (100,000 tons * $10 per ton) + (100,000 tons * $2 per ton) = $1,200,000

• Time charter party: A charterer books a tanker to transport oil for a period of six months. The time charter rate is $10,000 per day. The loading and discharging costs are estimated to be $100,000.