MONITORING TIME CHARTERING PERFORMANCE

By Sydney P. Levine of Shipping Intelligence Weekly

In a time when costs are being scrutinized more closely than ever, the study of a theoretical cost category has yielded surprisingly useful results. We at Shipping Intelligence have calculated the opportunity gains and losses associated with the actual time chartering practice of many of the major participants in the dry bulk and tanker markets. These calculations and the detailed reports that accompany them are proving to be of enormous interest to the boards of directors and managements of the companies themselves but also to banks, investors and competitors, all of whom, for varying reasons, are interested in the efficiency of the chartering function.

Opportunity gains and losses are notoriously difficult to measure. They aren’t “real” in an accounting sense; they don’t appear in financial statements; and they’re rarely used to judge performance. However, when they can be measured they can be very revealing.

One such category is the opportunity gain or loss from time chartering. If a charterer fixes a ship below the current market, he will earn an opportunity gain of the difference between his particular rate and the prevailing market rate – and it will accrue for every day of the charter. Similarly, if his rate is above the current market he will incur an accumulating opportunity loss.

This is only an excerpt of MONITORING TIME CHARTERING PERFORMANCE

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