What is a time charter?
A time charter is a contract under which the shipowner hires the vessel and crew to a charterer for a fixed period, at a daily hire rate, with the charterer directing the commercial employment and paying voyage costs. The owner retains nautical and technical control.
The canonical form for dry-bulk time charters is BIMCO’s NYPE 2015, the modern revision of the New York Produce Exchange form that has been the working standard since 1913. The Baltic Exchange publishes daily time-charter assessments (the BSI, BHSI, BCTI and 5TC routes) that the desk uses as the reference point when fixing or repositioning tonnage. NYPE 2015 sets out delivery and redelivery, the hire mechanism, the off-hire trigger, the bunker pass-on, and the trading and cargo exclusions.
The instrument sits between voyage chartering (where the owner runs the voyage and quotes a freight rate per tonne) and bareboat chartering (where the charterer takes the ship as if it were their own). It gives the charterer time-based optionality on the vessel: they choose the cargoes, the lifts, and the lanes within the agreed trading limits, and they pay the voyage variable costs as they go. The owner is paid hire whether the ship is loaded, ballasting, or waiting.
How a time charter works in practice
The charterer initiates by circulating an inquiry through brokers: vessel size band, delivery range, period, and a target hire level. The owner counters with the candidate vessel’s position, last cargoes, performance speed and consumption, and the commercial terms. Negotiation closes on subjects (cargo exclusions, trading limits, hire rate, delivery and redelivery ranges, bunker quantities on delivery and redelivery, performance warranties, and the off-hire and arbitration clauses). On lifting subjects, the fixture recap is the binding document until the charter party is signed.
Hire is paid in advance, typically every fifteen days, in USD into the owner’s nominated account. The charterer pays for bunkers (lifted at agreed grades and quantities at delivery, redelivered at similar quantities), port costs and disbursements, canal dues, towage, agency fees, and any cargo-related costs. The owner pays crew wages, insurance (H&M and P&I), stores, lubricants, dry-docking, and maintenance. Performance is monitored against the voyage estimate: if the vessel underperforms on speed or overconsumes on the warranted bunker curve, the charterer can claim performance damages at the end of the period or on a rolling basis.
The fixture closes at redelivery, with bunkers on board valued against the delivery quantities, off-hire accrued time deducted, hire reconciled to actual days, and any claims (cargo, performance, off-hire) settled or referred to arbitration. The NYPE 2015 default forum is London arbitration under English law.
| Cost or risk axis | Owner exposure | Charterer exposure |
|---|---|---|
| Bunker | Owner pays delivery stem, charterer reimburses at agreed price | Charterer pays all voyage bunkers and redelivers similar quantities |
| Port costs and disbursements | None | Charterer pays all port costs, agency, and disbursements |
| Canal dues and towage | None | Charterer |
| Off-hire | Owner loses hire whenever vessel is off-hire under clause 17 | Charterer suspends hire for the off-hire period |
| Demurrage and laytime | Not applicable at this layer | Charterer carries any sub-voyage laytime exposure |
| Weather and routing | Owner under good-weather performance warranty | Charterer plans routing and accepts weather days as on-hire |
| Cargo claims | Owner liable for unseaworthiness and crew negligence under Hague-Visby | Charterer liable for cargo and stowage instructions |
| Crew | Owner pays wages, manning, training | None |
| Maintenance and class | Owner maintains class, insurance, and operational standard | None |
Time charter vs voyage charter
The cornerstone disambiguation in dry bulk is time charter against voyage charter. On a voyage charter the owner sells a movement of cargo for a freight rate per tonne and absorbs the voyage variable costs; on a time charter the owner sells the use of the vessel for a daily hire and the charterer absorbs those costs. The third reference point, spot charter, is voyage chartering taken on prompt or near-prompt terms at the prevailing market.
| Dimension | Time charter | Voyage charter | Spot (single voyage) |
|---|---|---|---|
| Who runs the voyage | Charterer | Owner | Owner |
| Who pays bunker | Charterer | Owner | Owner |
| Who pays port costs | Charterer | Owner (free in or out per terms) | Owner |
| Hire or freight basis | USD per day | USD per tonne | USD per tonne, prompt |
| Cargo risk | Charterer chooses cargoes | Owner accepts one cargo lot | Owner accepts one cargo lot |
| Time risk | Charterer (pays for waiting days) | Owner (pays for slow steaming) | Owner |
| Typical duration | 3 to 36 months | Single laden voyage | Single prompt voyage |
| Best for | Programme cargoes, sub-letting, position play | Single discrete movement | Spot cargo, no period view |
A charterer prefers time over voyage when they have a programme of liftings rather than a single cargo: a trader who lifts grain from Argentina to North Africa monthly through a season is paying for waiting time on every voyage charter and would prefer to lock the daily rate. A charterer also prefers time when they want to run the vessel against their own market view (sub-letting on trip-charter or voyage basis when the spot market firms, lifting their own cargoes when it softens). An owner prefers period time charter cover when forward freight visibility is poor and a counterparty of acceptable credit is willing to pay a daily hire that sits at or above their breakeven. Voyage chartering remains the right answer for single discrete movements where the charterer does not want vessel risk and the owner has firm coverage for the lane.
Risk allocation between owner and charterer
The headline shift compared to voyage chartering is that the charterer takes time risk. Whenever the vessel is on-hire, the meter is running: waiting for a berth, sitting at anchor on receivers’ instructions, repositioning between cargoes, all of it is charterer’s time. The owner gives that up in exchange for a fixed daily rate and a predictable cashflow.
The clause that controls this exchange is NYPE 2015 clause 17, the off-hire clause. Hire ceases to be payable when the vessel is prevented from performing the service required by the charterer through a defined list of causes (breakdown, deficiency of crew or stores, dry-docking, detention by class or authorities, and similar). The clause is exhaustive: causes not enumerated do not stop hire. Disputes about whether a specific event triggers off-hire (a bunker quality dispute, a slow main engine that has not actually broken down, a port-state inspection delay) are routinely the largest single item in time-charter arbitration.
The second clause that materially shifts risk is the performance warranty. The owner warrants a speed and bunker consumption curve in good weather (typically up to Beaufort 4 and Douglas sea state 3), and the charterer is entitled to damages if the vessel persistently underperforms on weather-routed analysis. Without independent weather routing data the warranty is unenforceable, which is why charterers should fix a routing provider before delivery rather than after a dispute arises.
Worked fixture example
Supramax, 6 months time charter, Pacific round
- Trade
- Pacific round, grain and minerals
- Lane
- SE Asia and NOPAC out, India and China discharge
- Vessel size band
- Supramax, 58,000 DWT
- Duration
- 6 months, +/- 30 days in charterer's option
- Delivery laycan
- April 2026, dop SE Asia
- Hire rate
- USD 14,500 per day
- Key clauses
- NYPE 2015 base, BIMCO bunker clause, Conwartime 2013, off-hire clause 17 unamended
The hire level was negotiated against the prevailing Baltic Supramax 10TC assessment for the prior trading week, with the period premium absorbed because the charterer accepted a Pacific-only trading limit. Excluding Atlantic positions cut the owner’s downside on redelivery and supported the rate.
Bunkers were taken on delivery at quantities corresponding to a Pacific round laden voyage, priced at Singapore VLSFO benchmark on the delivery date. Redelivery quantities were set at similar tonnages on the same grade, with a price-cap mechanism in case Singapore bunker prices moved more than 20 percent during the period.
The off-hire clause was left unamended, which mattered when the vessel went into an unscheduled hold cleaning on the second voyage after a residue claim from a previous shipper of bauxite. Hire suspended for 38 hours against the charterer’s account, then resumed. Performance was monitored monthly against the warranty curve, with no claim arising over the period.
Common mistakes and misuse
- Missing the off-hire trigger because the dispute is framed as a bunker quality issue rather than a clause 17 cause. Bunker disputes do not stop hire under unamended NYPE 2015; if charterers want bunker quality as an off-hire trigger they need to add the BIMCO bunker quality clause explicitly.
- Treating the charterer-paid bunker stock at delivery as a free option on price. The delivery valuation locks in cost; the redelivery valuation locks in proceeds. If charterers do not hedge the spread they are exposed to the bunker curve over the period.
- Accepting the performance warranty without arranging independent weather routing before delivery. Without a routing provider’s data, the warranty is unenforceable and a persistent underperformer cannot be claimed against.
- Letting the trading limits drift in negotiation. A “worldwide trading, IWL” limit looks generous but pulls in war risk areas and ice exclusions that materially change the owner’s insurance picture. Define exclusions in writing.
- Redelivering without a clean bunker survey at both ends of the period. Quantities and grade need to be confirmed by an independent surveyor or the redelivery reconciliation will be disputed.
- Confusing on-hire waiting time with off-hire. Waiting for a berth on receivers’ instructions is on-hire and charterer’s account; waiting because of a class detention is off-hire and owner’s account.
When a time charter is the right choice
A time charter is the right instrument when the charterer has either a programme of liftings, a market view that justifies running the vessel themselves, or a need for position control over a series of months. It is the wrong instrument for single discrete movements, where a voyage charter or spot charter gives the charterer clearer cargo-only exposure without taking time risk. For shorter horizons of one to three months, the trip charter is a duration-limited variant that fixes the period to a single laden trip.
If your desk is weighing time against voyage, the question is whether you want to own the time risk in exchange for the daily-rate discipline, or sell the cargo movement to an owner and keep your balance sheet clean. The negotiation and structuring sits inside the broader chartering process, and our ship-brokering desk handles the period negotiation, performance monitoring, and off-hire claims management end to end.
Scope and what this page does not cover
This page describes the commercial mechanics of a time charter in dry bulk and the risk allocation that NYPE 2015 sets out. It does not provide clause-by-clause legal drafting, jurisdiction-specific case-law commentary, or market rate forecasts. For current hire-rate context, consult the Baltic Exchange assessments and your broker’s market report rather than a static reference page.