Ship chartering: what does it take to be an excellent professional?

  • 26/12/2018
  • 11 minutes

Working in ship chartering demands a profile that is strategic and committed in obtaining results. Considering the complexity of the logistical operations involved in the international trade, the margin of error is close to zero. In offshore commerce, a difference of cents in the price of grain or commodity units could represent an addition of fortunes in the final price.

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Facing such a challenge, it’s important to understand exactly what being a first-rate charterer entails. In this scenario, we highlight the following factors. Take a look!

Verify the shipowner’s credibility

As in any commercial transaction, everything starts with a judicious evaluation of the professional history of the shipowner, that is, the figure who will put a vessel at the charterer’s disposal.

This evaluation consists of researching if the freight operator in question has any ships arrested or even if, in the past, he or she failed to perform a load or to honor a contract. Therefore, the professional or company must present unquestionable credibility.

The charterer must cross check the collected information with the type of charter party that was signed. If it’s a voyage charter, for example, there is a lesser degree of risk than in a time charter party.

Define the type of shipping contract

About the question of contract, it’s important to highlight that the international market has seasonalities with directly impact prices and customs duties.

In certain periods of the year, the charterer must be ready to seize any advantageous opportunities which might arise during specific months or days.

A good example of that was observed recently by Companhia Vale do Rio Doce, which saw signing a long-term charter party as a way of reducing operational costs. Remember: in the export market, a few cents make a lot of difference.

Know how to work with discretion

In Brazil, it’s common to say that to act stealthily in a low profile (“comer pelas beiradas”) is the safest way of working. When it comes to chartering, the logic is similar. When the charterer goes looking on the market for partners for his or her operations, the professional ends up signaling for competitors that they could find a business opportunity there.

As shown previously, operations in international commerce are complex and one single cargo transportation could generate millions of dollars. In a scenario of naturally prominent players, every negotiation is a potential business line to be explored.

Know all the different shippers

Each shipper works according to the terminology and the rules of their own loading terminal. Besides the bureaucratic aspects, it’s fundamental that the charterer knows as much as possible about the operational dynamics of the port in which the cargo will be loaded or unloaded. After all, seasonalities require paying the utmost attention to dates, which make all the difference when calculating the total price of sea freight shipping.

Don’t forget that an outstanding charterer knows what to do to approximate the charter party to a back to back contract.

Another important detail to mind, besides being judicious when choosing the shippers, is counting on partners with a good reputation and proven technical efficiency. Shipping agents, brokers, and other professionals will be your guarantee that the peculiarities of your operation in each port will be dealt with correctly.

Act in various fronts of negotiation

In the commodity and agricultural input market, operations involve massive volumes of grain or of liquid, which need to be transported through many nautical miles until arriving at their destination.

Usually, the transport of these materials is preceded by tenders, a kind of bidding process open to the international market. During them, governments or major companies can offer incentives in the form of subsidies to those who assume the risks of international logistics.

However, the charterer shouldn’t consider only what’s offered for the exporter. To guarantee the success of the operations and the profitability of the business, the charterer must organize a cost grid contemplating logistics, taxes and, of course, the price of the commodity being transported, considering the reality of various countries.

In this aspect, it’s worth noting again the importance of working with discretion and, preferably, with known professionals. In this way, the charterer avoids a simple price research from becoming a reason for the shipowner to inflate the prices. It’s like if you needed to cross a lagoon infested by alligators. If you swim in a way that is too flashy, you will grab the predator’s attention.

Recognize opportunities in other charters

A charter party is, after all, a transport like any other. The charterer pays a shipowner, who puts his or her vessel at the charterer’s disposal to transport cargo from point A to point B. Considering that, the principle is the same as in urban mobility.

An Uber ride for one single person, for example, is more expensive than when you choose the “pool” modality, in which the cost of the ride is shared by all passengers.

In international trade, such a strategy can be replicated in the context of chartering. A possible “pool” of charterers can represent a significant reduction of the shipping costs, as long as the partnership chosen is certifiably competent.

Another advantage is that, by sharing the costs with someone who already has a closed deal, you reduce the risk of exposition in relation to eventual negotiations in course.

Stay up-to-date with the international market

Negotiating in the international market means acting on a stage in which the scenery and the actors are on an intense flow, with ever-changing positions.

Charterers that operate with the transport of liquid or in bulk cargo must pay special attention. Since they deal directly with the market oscillations imposed by governmental politics, it’s of the utmost importance that they stay up-to-date with geopolitical movements, which directly affect the flow of international transport.

Countries are regularly being boycotted by other countries, being added to “blacklists” or suffering economic embargoes, in reprisal against or in obedience to determinations of the United Nations (ONU).

However, it’s not only just people who might influence transport prices and conditions. Climate phenomena such as droughts, floods, hurricanes, and tsunamis are some of the possible factors which would make an operation more or less risky. As in any profession that demands a high level of specialization, ship chartering requires its selfless professionals to have a constant disposition for learning and for improving themselves.

If you plan on becoming an outstanding ship chartering professional, don’t leave with any doubts! Leave a comment and we’ll be glad to answer it.