How Shipowners Can Improve Vessel Employment

A ship that is never idle is not necessarily a ship that is earning. Utilisation counts the days a vessel is on a voyage; the number that pays the mortgage is the days she is on a laden voyage at a rate that beats the alternative. Improving employment means attacking the difference between those two figures.

Over a year, that difference lives in two places: days spent waiting for a cargo, and days spent sailing without one. Everything below is an attack on one or the other.

Count the year, not the voyage

Take a vessel that completed nine voyages in twelve months. The freight looked respectable on each of them. But the year also contained twenty-two idle days between fixtures and fifty-one ballast days getting to loading ports — seventy-three days, one fifth of the year, generating nothing while running costs continued.

Cutting that by a third is worth more than a dollar per tonne on every cargo fixed. It is also entirely within the owner's control, which freight levels are not.

Think in rounds, not in legs

The single most effective habit in employment planning is to stop evaluating a cargo as a voyage and start evaluating it as a position change.

A fixture that ends in an area with a thin outbound market has borrowed against the next one. A fixture ending where cargo is plentiful has lent to it. The practical test, applied before accepting any cargo, is simple: what does the ship do next from there, and what is it worth?

Where a trade permits it, the strongest pattern is triangulation — a round in which each discharge port is close to the next loading port, so the ballast legs are short by construction. A three-leg round with two short repositioning legs will usually beat two high-rate voyages separated by a long ballast, even when each of those voyages looks better in isolation.

Backhaul cargoes are worth more than their rate

A cargo that pays poorly but moves the ship in the direction she has to go anyway is not a poor fixture. Compare it against ballasting, not against the headline market: if the freight covers the fuel and port costs of a passage that would otherwise be made empty, it has already paid for itself, and anything above that is profit on a leg that was going to cost money.

Owners who refuse backhauls on principle often pay for the principle twice — once in the ballast leg, and again in arriving at the next loading area later than the ships that took them.

Give the laycan room

A narrow laycan window is a filter that removes cargoes from consideration. Widening the window by three or four days at the front frequently doubles the number of cargoes a vessel can compete for, at the cost of a little uncertainty in the schedule.

The same applies to the opening port. A vessel described as open "Singapore" is competing in one market; described as open "Singapore–Port Klang range, prompt", she is competing in several.

Spot, period and contract

Three ways to employ a ship, and most owners should have a view on all three rather than defaulting to one.

• Spot — voyage by voyage. Highest upside in a rising market, full exposure to idle days and to a falling one;
• Period — a time charter for months or years. Predictable income, lower ceiling, and the exposure moves to the charterer's performance rather than the market's;
• Contract of affreightment — an obligation to carry a stated quantity over a period, with the vessel nomination left to the owner. It fills the calendar in advance and, properly structured, lets the owner build rounds around known cargoes.

A common and sensible arrangement is a base of contract or period business covering the running costs, with spot voyages taking the upside. The mix is a commercial decision, not a technical one, and it is worth revisiting when the market turns rather than once a year.

Trading limits: which ones are earning their keep

Every restriction in the vessel's description removes cargoes. Some are necessary — ice class, war risk areas, cargo exclusions required by insurance or by the ship's condition. Others survive out of habit.

It is worth reviewing periodically which exclusions still reflect a real constraint: a cargo excluded because of a bad experience eight years ago, a range excluded because of an agency problem that has since been solved, a hold cleanliness standard the ship can in fact meet with two extra days. Each one that can be dropped widens the market the vessel competes in.

Be a ship the market puts forward

Brokers propose ships they can describe confidently. That is not a matter of relationships so much as of record, and it is built from ordinary things:

• a vessel description that is accurate, so that intake and gear turn out as stated;
• answers within the validity of the offer rather than after it;
• fixtures that are performed as agreed, including the awkward ones;
• laytime settled on the facts instead of argued as a matter of course;
• a clear, current position list going out to the market rather than waiting to be asked.

An owner with that record is shown cargoes before they are circulated widely. That is worth more over a year than any individual negotiation.

Position ahead of the season

Several trades move on a calendar: harvests, construction seasons, ice periods, monsoon-affected ports. A vessel that arrives in a seasonal market at the same moment as everyone else competes on price. One that is already there when the first cargoes appear sets it.

The same logic applies in reverse — leaving a market before it empties is usually cheaper than ballasting out of it afterwards, together with the rest of the fleet.

What to give the broker

Employment improves fastest when the market has something to work with. For each vessel that means the full description with deadweight, draft, capacities, gear and consumptions; the current and next open position with dates; clear trading and cargo limits; a realistic indication of what the owner is looking for; and the authority to move quickly when something suitable appears.

Incomplete or stale position information is the most common reason a suitable cargo goes to another ship.

Kiev Shipping Ltd has worked in vessel employment since 2000, with more than 350 voyages fixed across the Asian, Black Sea, Mediterranean, Continent, Baltic, Red Sea and Persian Gulf markets. We work to the owner's instructions on trading areas, cargoes and minimum terms, and the final approval of every fixture stays with the owner.

Service overview: Vessel Employment and Commercial Ship Management.

See also: Voyage Estimation Before Fixing a Cargo · Commercial Ship Management for Shipowners · more in Commercial Ship Management.