Demurrage
Meaning
Demurrage is the agreed daily amount the charterer pays the owner for every day the ship is kept in port beyond the laytime allowed.
Demurrage explained
Demurrage is liquidated damages for detaining the ship. The rate is agreed in the fixture, usually in US dollars per day pro rata, and on tankers it is often close to the ship's current time-charter earning. Once laytime expires, demurrage runs continuously unless the charter says otherwise; the usual phrase is “once on demurrage, always on demurrage”.
On tankers demurrage is a large share of voyage economics: congested discharge ports, terminal slots and cargo receivers' delays can add days. Owners usually have a strict time limit to present the claim with supporting documents, typically 90 days after discharge, after which the claim may be lost entirely.
Example
A VLCC fixed at $60,000 per day demurrage waits 3.5 days beyond its laytime at a congested Chinese discharge port. The claim is 3.5 × $60,000 = $210,000.
Watch out for
Time bars are strict. A claim submitted without the documents the charter requires (NOR, statement of facts, pumping logs) can be time-barred even if it was sent on time.
Related terms
Laytime
Laytime is the time the charterer is allowed, without paying extra, to load and discharge the cargo under a voyage charter.
Despatch
Despatch is money the owner pays back to the charterer for finishing cargo operations faster than the laytime allowed.
Demurrage time bar
A demurrage time bar is the deadline, usually 90 days after discharge, by which the owner must present a fully documented demurrage claim.
Half demurrage
Half demurrage is a reduced rate, half the agreed demurrage, that many tanker charters apply to delays from causes outside either party's control.
Once on demurrage, always on demurrage
Once on demurrage, always on demurrage means that after laytime expires, laytime exceptions stop applying and demurrage runs continuously.