Commercial Ship Management for Shipowners

A ship has two managements, and they answer different questions. Technical management keeps the vessel seaworthy, crewed, certified and maintained. Commercial management decides what she carries, for whom, at what price and on what terms — and then makes sure the voyage produces the money it was supposed to.

Owners frequently have the first in place and treat the second as something that happens by itself, through whichever broker happens to call. This article sets out what commercial management actually covers, where the owner's authority stays, and when it is worth having.

The two managements side by side

They meet in a few places — hold cleaning between cargoes, gear certification, bunker planning, off-hire in the middle of a laycan — and those overlaps are exactly where a voyage tends to go wrong when the two sides are not talking.

What commercial management covers

Marketing the vessel

The ship has to be present in the market as a described, dated, credible position — circulated to the brokers who serve the trades she can work, updated as the itinerary moves, with her particulars accurate enough that an owner is never explaining a discrepancy after a fixture.

Finding and evaluating cargo

Screening enquiries against the vessel rather than against the freight: can she lift the parcel at that draft, does the berth suit her length and gear, does the laycan fit the current voyage, and what does the fixture do to her next position. Every serious candidate is put through a voyage calculation before it is discussed — the structure of that calculation is set out in Voyage Estimation Before Fixing a Cargo.

Negotiation and fixture

Freight, quantity and tolerance, laycan, loading and discharging terms, how laytime is counted, demurrage and despatch, freight payment, the charter-party form and the riders. Then the recap, checked line by line, and the charter party drawn from it without drift.

Voyage operations

Agent appointments at both ends, voyage instructions to the master, notices and notice of readiness, bunker planning, bills of lading, and the handling of whatever the voyage produces: congestion, a shifted berth, a shortage on outturn, a cargo document that does not match.

Laytime, demurrage and settlement

Statements of facts collected and checked while the facts are fresh, laytime calculated, claims presented with the evidence attached, and freight and balances collected. A large share of the money that owners lose is lost here, weeks after the cargo is out, for want of a document nobody asked for at the time.

Market reporting

What fixed, at what level, in the trades the vessel works — so that the next decision is made against evidence rather than against the last offer received.

Where the owner's authority stays

Commercial management is not a transfer of control. In every arrangement worth entering, the owner sets and keeps:

• permitted trading areas and any exclusions;
• acceptable and excluded cargoes;
• minimum freight or hire levels;
• approval of the counterparty;
• operational restrictions arising from the ship's condition or her certificates;
• final approval of every fixture.

The manager's job inside those limits is to bring forward options, show the numbers behind each, recommend one, and execute the decision the owner takes. An arrangement in which the owner learns about a fixture after it is concluded is a different arrangement, and it should be entered deliberately if at all.

How it is paid for

Commercial management is normally remunerated by a commission on the freight or hire earned, sometimes with a modest fixed element. The structure matters less than the fact that it is stated, disclosed and aligned: the manager earns when the vessel earns.

Address commission and brokerage on each fixture are separate, customary, and appear in the recap. An owner is entitled to see the full commission structure of any fixture before approving it.

When it is worth having

Three situations account for most of it.

A single vessel or a small fleet. A chartering desk is a fixed cost that one or two ships cannot carry, but the work still has to be done — and done badly it costs far more than it saves.

A new trade or a new area. An owner moving a ship into an unfamiliar region is negotiating against people who know the ports, the customary terms and the counterparties. That gap closes faster with someone already in the market than by learning it a fixture at a time.

A vessel underperforming her class. Where a ship is earning visibly less than comparable tonnage, the cause is usually structural — idle days, long ballast legs, a laycan policy that is too tight, exclusions that are no longer needed — rather than bad luck on individual rates. Those are addressed at the employment level, as set out in How Shipowners Can Improve Vessel Employment.

What the owner supplies

To work properly the arrangement needs, from the owner's side: the full and accurate vessel description with capacities, drafts, gear and consumptions; the current itinerary and open position; the insurance and class position including any cargo restrictions; running cost figures for the estimate; written trading instructions; and a contact who can answer inside the validity of an offer.

Kiev Shipping Ltd has provided commercial ship management, vessel employment and chartering support since 2000, with more than 350 voyages fixed. We work in dry bulk, breakbulk, project, bagged and general cargo across Asian, Black Sea, Mediterranean, Continent, Baltic, Red Sea and Persian Gulf markets, in parcels of roughly 3,000 to 50,000 tonnes.

Service overview: Commercial Ship Management Services and Charter-Party Support.

See also: Voyage Estimation Before Fixing a Cargo · How Shipowners Can Improve Vessel Employment · more in Commercial Ship Management.