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The demurrage sometimes causes a loss to the seller as it increases cost of the total freight. [3] The demurrage fee is often a daily amount agreed between charterers and ship owners. Ideally, the demurrage fee (per day in US dollars) covers the daily time charter rate, daily voyage costs, and the ship owner’s risk premium. [4]
Demurrage in a currency system reduces discount rates, and thus increases the present value of a long-term investment, and thus gives an incentive for such investments. [ 1 ] Unlike inflation , demurrage gradually reduces only the value of currency held: it functions as a negative interest (a tax) on currency held versus inflation that also ...
If the charterer's delay means that laytime is exceeded, a predetermined penalty (i.e. liquidated damages) called "demurrage" is incurred. [5] [6] If the whole period of laytime is not needed, a refund called "despatch" may be payable by the shipowner to the charterer.
A freight rate (historically and in ship chartering simply freight [1]) is a price at which a certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport ( truck , ship , train , aircraft ), the weight of the cargo, and the distance to the delivery destination.
Worldscale is a unified system of establishing payment of freight rate for a given oil tanker's cargo. Worldscale was established in November 1952 by London Tanker Brokers' Panel on the request of British Petroleum and Shell as an average total cost of shipping oil from one port to another by ship. A large table was created as result.
Seigniorage is the positive return, or carry, on issued notes and coins (money in circulation). Demurrage, the opposite, is the cost of holding currency.. An example of an exchange of gold for "paper" where no seigniorage occurs is when a person has one ounce of gold, trades it for a government-issued gold certificate (providing for redemption in one ounce of gold), keeps that certificate for ...
The freight rate of a tanker charter party is specified in one of four ways: by a lump sum rate, by rate per ton, by a time charter equivalent rate, or by Worldscale rate. [50] In a lump sum rate arrangement, a fixed price is negotiated for the delivery of a specified cargo, and the ship's owner/operator is responsible to pay for all port costs ...
Some shippers choose instead to charter a ship, paying a daily rate instead of a set price per ton. [53] In 2005, the average daily rate for a Handymax ship varied between $18,000 – $30,000. [53] A Panamax ship could be chartered for $20,000 – $50,000 per day, and a Capesize for $40,000 – $70,000 per day. [53]