How do chartering negotiations work?
A charter negotiation is a structured exchange of firm offers and counters between an owner and a charterer, usually through brokers. Each offer carries a reply-by time, terms move on an accept-or-except basis, and the deal fixes on subjects before subjects are lifted into a binding recap.
The negotiation is the commercial core of the chartering process. A cargo enquiry circulates, an owner with suitable open tonnage replies with a firm offer, and the two sides exchange counters until every main term is agreed or rejected. Unlike a retail price haggle, the dry-bulk negotiation runs on conventions that the whole market understands: a firm offer is binding for its stated validity, a counter that does not mention a term accepts it, and the fixture is provisional until the subjects are lifted. Getting those conventions wrong is how desks fix deals they did not mean to, or lose deals they thought they had. The same machinery applies whether the instrument is a voyage charter priced per tonne or a time charter priced per day.
The offer and counter ladder
A charter negotiation moves through a fixed sequence of stages. Each stage has its own conventions, and skipping or rushing one is where fixtures break. The timeline below walks the canonical stages from the first enquiry to a clean recap, in the order the market uses them.
- 01
Enquiry
Stage 1The charterer circulates the cargo order through one or more brokers: cargo, quantity, load and discharge ports, laycan and the freight idea. Owners with open tonnage in the area indicate interest. No offer is binding yet. Example: 72,000 mt coal, Newcastle to Rotterdam, laycan 10 to 18 June, owners to indicate.
- 02
Firm offer
Stage 2An owner submits a firm offer on the full main terms, binding for a stated validity (reply-by time). Until that time expires the owner cannot offer the same ship elsewhere. Example: freight USD 18.50 per tonne FIO, demurrage USD 22,000 per day, GENCON 2022, reply by 1700 hours London time today.
- 03
Counters exchanged on accept-or-except basis
Stage 3The charterer counters: the counter accepts every term it does not mention and excepts (changes or rejects) the ones it does. Each counter carries its own validity. The two sides ladder the open terms toward a meeting point. Example: charterer counters freight USD 17.00, demurrage USD 20,000, all else as offered, reply by 0900 tomorrow.
- 04
Fixed on subjects
Stage 4When the main terms meet, the parties fix on subjects: stated conditions that must clear before the deal is firm. Common subjects are subject stem (cargo confirmation), subject receivers or subject suppliers, and subject management or board approval. Example: fixed sub stem and sub charterers management approval, subjects to lift by 1200 tomorrow.
- 05
Subjects lifted
Stage 5Each subject is cleared or it fails. Once all subjects are lifted within the time allowed, the fixture becomes binding. If a subject fails, the deal falls away with no liability, which is why subjects are not to be treated as a free option. Example: charterer lifts subjects 1100 tomorrow, fixture now clean and binding.
- 06
Recap
Stage 6The broker issues the recap: the document that records every agreed main term and rider clause. The recap, not the later charter party, is the binding contract. It is checked line by line by both principals. See the structure on the fixture recap page.
- 07
Clean recap
Stage 7Once both sides confirm the recap is correct with no outstanding corrections, it becomes the clean recap: the final, agreed record from which the formal charter party is drawn up and signed. Example: owners and charterers both confirm recap all correct, clean recap circulated.
The sequence is roughly chronological but the counter stage can loop many times before the terms meet. The discipline that holds it together is the reply-by time on every offer and counter: it forces a decision, keeps the ship from being tied up indefinitely, and stops a stale offer being snapped up after the market has moved.
Accept or except, and trading on subjects
Two conventions do most of the work in a charter negotiation, and both are easy to misread under time pressure.
Accept-or-except is the rule that governs every counter. When a charterer counters an owner’s firm offer, the counter is taken to accept every term it does not expressly mention, and to except (vary or reject) only the terms it names. So a counter that says “freight USD 17.00, all else as offered” has accepted the demurrage, the laytime, the laycan, the charter party form and every rider clause in the original offer. The practical effect is that the open terms narrow with each round: once a term is accepted in a counter it is off the table unless reopened by name. This is why a careless counter can lock in a term the desk meant to revisit.
Trading on subjects is how the market handles conditions that cannot be confirmed at the moment the main terms meet. The parties fix “on subjects”, meaning the commercial deal is agreed but stays provisional until the listed subjects clear. The common ones in dry bulk are:
| Subject | What it means | Who carries it |
|---|---|---|
| Subject stem | Confirmation that the cargo will be available at the load port in the laycan, from the shipper's loading programme. | Charterer |
| Subject receivers | Approval of the fixture by the cargo receivers at the discharge end. | Charterer |
| Subject suppliers | Approval by the cargo suppliers or sellers at the load end. | Charterer |
| Subject management approval | Sign-off by the charterer's or owner's management on the negotiated terms. | Either party |
| Subject board approval | Sign-off at board level, used on larger or unusual commitments. | Either party |
When the subjects are lifted within the time allowed, the fixture is clean and binding. If a subject genuinely fails, the deal falls away and neither side owes the other, which is the whole point of fixing on subjects rather than fixing outright.
A freight negotiation from opening offer to fixture
The clearest way to see the ladder is to watch one negotiation move from an owner’s opening offer down to the fixed figure. The fixture below is representative and anonymised, not a real deal or a live quote. It is a Panamax carrying coal on a single voyage charter, and the parties trade three rounds on freight while also closing the gap on demurrage and laytime.
| Round | Owner offers | Charterer counters | What moved |
|---|---|---|---|
| 1 (firm offer) | Freight USD 18.50/mt, demurrage USD 22,000/day, laytime 96 hrs total | Freight USD 16.50/mt, demurrage USD 19,000/day, laytime 108 hrs total | Charterer opens USD 2.00 below on freight, pushes for more laytime |
| 2 | Freight USD 18.00/mt, demurrage USD 21,000/day, laytime 96 hrs (firm) | Freight USD 17.00/mt, demurrage USD 20,000/day, all else as offered | Freight gap narrows to USD 1.00; charterer drops the laytime ask |
| 3 | Freight USD 17.50/mt, demurrage USD 20,500/day, all else as offered | Freight USD 17.25/mt, accept demurrage USD 20,500, all else as offered | Gap down to USD 0.25; demurrage agreed at USD 20,500 |
| 4 (meeting point) | Freight USD 17.40/mt, all else agreed, fix on subjects | Accept USD 17.40/mt, fix sub stem and sub charterers approval | Freight fixed at USD 17.40/mt; parties fix on subjects |
Read down the ladder, the freight idea moved from an opening USD 18.50 against a USD 16.50 counter to a fixed USD 17.40, splitting the last USD 0.25 gap closer to the midpoint. Demurrage settled at USD 20,500 once the charterer accepted it in round 3, and the laytime ask fell away in round 2 when the charterer used a clean “all else as offered” counter. The deal then fixed on subject stem and subject charterers approval, and once those were lifted the recap was issued and confirmed clean. The accept-or-except convention is visible throughout: the moment the charterer countered “all else as offered” in round 2, demurrage and laytime were the only live terms left alongside freight, which is what let the last two rounds close so quickly.
The main terms on the table
Every charter negotiation runs over the same set of main terms. Each one is a lever the parties trade against the others: a charterer who gives ground on freight may claw it back on laytime or demurrage. The reference table below lists the canonical negotiated terms, each linking to its detail page.
| Main term | What is negotiated | Detail |
|---|---|---|
| Vessel and tonnage | Ship type, size and the specific vessel offered against the cargo. | Vessel and tonnage |
| Cargo | Commodity, grade and stowage characteristics of the parcel. | Cargo |
| Quantity | Stem size in metric tonnes, often with an owner's option on margin (moloo). | Recap main terms |
| Laycan | The window in which the ship must arrive and tender notice of readiness. | Laycan |
| Load and discharge ports | Named ports or ranges at each end, and any berth or draft restriction. | Load and discharge rate |
| Freight rate | Price of carriage, in USD per tonne for a voyage charter or per day for a time charter. | Freight rate |
| Laytime | The free time allowed for cargo operations before the demurrage clock starts. | Laytime |
| Demurrage | The agreed daily rate the charterer pays for detaining the ship beyond laytime. | Demurrage |
| Commission and brokerage | Address commission to the charterer and brokerage to the broker, as a percentage of freight. | Brokerage |
| Charter party form | The base form (GENCON family and similar) and the rider clauses amending it. | Charter party form |
The negotiation does not treat these in isolation. Freight, laytime and demurrage are economically linked: a charterer with a slow terminal can buy more allowed laytime up front rather than pay it back as demurrage after the event, and an owner will price that extra free time into the freight idea. The standard forms come from BIMCO, whose GENCON-family voyage charter form sets the default position on most of these terms unless the recap amends it.
What goes wrong in negotiations
Most failed or disputed fixtures trace back to a handful of avoidable negotiation errors rather than to the rate.
- Treating accept-or-except loosely. A counter that says “all else as offered” accepts every unmentioned term, including ones the desk meant to revisit. Reopening a term after it was accepted in a counter is a fresh negotiation, not a correction, and the other side is entitled to move its other numbers in response.
- Letting an offer lapse, then trying to revive it. A firm offer is dead the moment its reply-by time passes. Replying after validity is a new offer that the other side can reject or re-price, and in a rising market they usually will. Discipline on the clock cuts both ways.
- Using subjects as a free look. Fixing on subjects to hold a ship while shopping a better rate, then failing the subject in bad faith, is the fastest way to lose standing with owners and brokers. The damage is reputational and lasting, not contractual.
- Failing to count the recap line by line. The recap is the binding contract, not the later charter party. A term that was agreed verbally but mistyped or omitted in the recap is governed by the recap. Confirming a recap clean without checking every main term is how desks discover a wrong demurrage rate after the ship has sailed.
- Negotiating freight in isolation. A headline freight win that gives away laytime or accepts a low demurrage rate can cost more than it saves. The terms are a system; trading them one at a time without modelling the combined economics is how a good rate turns into a bad fixture.
- Confusing an indication with a firm offer. An indication during the enquiry stage is not binding and carries no validity. Acting as though an owner is committed before a firm offer is on the table leads to deals that evaporate when the market moves.
Scope and what this page does not cover
This page explains how a charter negotiation is conducted: the offer and counter ladder, the accept-or-except convention, trading on subjects, the recap, and the main terms in play. It does not draft or interpret specific charter party clauses, advise on the law of contract formation or when a binding fixture arises in a contested negotiation, or assess any particular market level. Those questions are matters for chartering counsel and a desk-side broker working from the actual exchange of messages and current Baltic Exchange data. The freight figures, demurrage rates and counter-ladder steps shown here are representative and anonymised, not real fixtures or live quotes. To run a live negotiation against current tonnage and rates, the ship-brokering desk handles the offer-counter exchange and the recap on your behalf.