【Trade Mechanics】What Is Demurrage and Who Pays It
Quote from chief_editor on June 30, 2026, 5:30 pmDemurrage in commodity trade explained: what laytime is, when demurrage starts, who pays it, and how to calculate a demurrage claim.
Demurrage is compensation paid to a vessel owner when a chartered vessel is detained at a port beyond the agreed free loading or discharge time (known as laytime). In commodity trade, demurrage is a routine but significant cost that can substantially affect transaction profitability.
The logic is straightforward: a vessel owner charters their vessel to a trader or cargo owner for a specific period or voyage. The charter party — the contract between the vessel owner and the charterer — allocates a defined number of hours or days for loading and discharging. If the operation takes longer than that allocation, the charterer compensates the vessel owner for the delay at a pre-agreed rate.
Laytime: The Foundation of Demurrage
Laytime is the period allowed under a charter party for loading or discharging cargo. It is expressed in days, hours, or tonnes per day. For example, a charter party might allow 72 hours of laytime for discharge, with discharge to proceed at 2,000 MT/hour.
Laytime begins counting from the moment the vessel tenders a Notice of Readiness (NOR) — a formal notification from the vessel master that the vessel has arrived, is ready to load or discharge, and is waiting for the port operation to begin. Depending on the charter party terms, laytime may start immediately on NOR tender, or after a defined notice period.
Laytime is suspended during events excluded under the charter party terms — typically: rain if the commodity cannot be loaded or discharged in rain; strikes; vessel equipment breakdowns; and sometimes weekends or public holidays depending on the charter party terms (SHINC: Sundays and Holidays Included; SHEX: Sundays and Holidays Excluded).
When Demurrage Begins
Demurrage begins when laytime is exhausted — when the allowed loading or discharge time has run out and the vessel is still waiting or still being worked. From that point, every hour costs the charterer money at the demurrage rate.
Demurrage rates are set in the charter party. For a typical Supramax bulk carrier (approximately 50,000-60,000 DWT), demurrage rates often range from $10,000 to $25,000 per day depending on market conditions. A vessel that sits in a congested port for five days beyond laytime creates a $50,000-$125,000 demurrage bill at those rates.
Who Is Responsible for Demurrage
The charterer — the party who hired the vessel — is primarily responsible for demurrage under the charter party. But in a commodity trade chain, the charterer is often a trader who is performing under a sale contract with a buyer. Whether the trader can pass the demurrage cost to the buyer depends on the sale contract terms.
CIF and CFR contracts typically make the buyer responsible for discharge operations. If demurrage at the discharge port is caused by the buyer's failure to provide a berth or discharge crew, the demurrage cost is ultimately the buyer's. The trader (as charterer) pays the vessel owner and then claims the cost from the buyer under the sale contract.
FOB contracts leave the vessel in the buyer's hands from loading — any demurrage at the load port caused by the seller's failure to have cargo ready is the seller's liability; demurrage at discharge is the buyer's.
Calculating a Demurrage Claim
A laytime statement (also called a statement of facts) records the chronological sequence of events during loading or discharge: when the NOR was tendered, when work started, when it stopped (and why), and when it was completed. From this record, the laytime used is calculated.
If laytime used exceeds laytime allowed: Demurrage = (Hours over laytime) × (Demurrage Rate per day / 24)
For example: 36 hours of laytime over, at $18,000/day demurrage rate = 36 × ($18,000/24) = $27,000.
Demurrage claims are a standard part of commodity trade settlement and should be verified against the charter party terms and the actual statement of facts before payment — errors in laytime calculations are common.
Demurrage in commodity trade explained: what laytime is, when demurrage starts, who pays it, and how to calculate a demurrage claim.
Demurrage is compensation paid to a vessel owner when a chartered vessel is detained at a port beyond the agreed free loading or discharge time (known as laytime). In commodity trade, demurrage is a routine but significant cost that can substantially affect transaction profitability.
The logic is straightforward: a vessel owner charters their vessel to a trader or cargo owner for a specific period or voyage. The charter party — the contract between the vessel owner and the charterer — allocates a defined number of hours or days for loading and discharging. If the operation takes longer than that allocation, the charterer compensates the vessel owner for the delay at a pre-agreed rate.
Laytime: The Foundation of Demurrage
Laytime is the period allowed under a charter party for loading or discharging cargo. It is expressed in days, hours, or tonnes per day. For example, a charter party might allow 72 hours of laytime for discharge, with discharge to proceed at 2,000 MT/hour.
Laytime begins counting from the moment the vessel tenders a Notice of Readiness (NOR) — a formal notification from the vessel master that the vessel has arrived, is ready to load or discharge, and is waiting for the port operation to begin. Depending on the charter party terms, laytime may start immediately on NOR tender, or after a defined notice period.
Laytime is suspended during events excluded under the charter party terms — typically: rain if the commodity cannot be loaded or discharged in rain; strikes; vessel equipment breakdowns; and sometimes weekends or public holidays depending on the charter party terms (SHINC: Sundays and Holidays Included; SHEX: Sundays and Holidays Excluded).
When Demurrage Begins
Demurrage begins when laytime is exhausted — when the allowed loading or discharge time has run out and the vessel is still waiting or still being worked. From that point, every hour costs the charterer money at the demurrage rate.
Demurrage rates are set in the charter party. For a typical Supramax bulk carrier (approximately 50,000-60,000 DWT), demurrage rates often range from $10,000 to $25,000 per day depending on market conditions. A vessel that sits in a congested port for five days beyond laytime creates a $50,000-$125,000 demurrage bill at those rates.
Who Is Responsible for Demurrage
The charterer — the party who hired the vessel — is primarily responsible for demurrage under the charter party. But in a commodity trade chain, the charterer is often a trader who is performing under a sale contract with a buyer. Whether the trader can pass the demurrage cost to the buyer depends on the sale contract terms.
CIF and CFR contracts typically make the buyer responsible for discharge operations. If demurrage at the discharge port is caused by the buyer's failure to provide a berth or discharge crew, the demurrage cost is ultimately the buyer's. The trader (as charterer) pays the vessel owner and then claims the cost from the buyer under the sale contract.
FOB contracts leave the vessel in the buyer's hands from loading — any demurrage at the load port caused by the seller's failure to have cargo ready is the seller's liability; demurrage at discharge is the buyer's.
Calculating a Demurrage Claim
A laytime statement (also called a statement of facts) records the chronological sequence of events during loading or discharge: when the NOR was tendered, when work started, when it stopped (and why), and when it was completed. From this record, the laytime used is calculated.
If laytime used exceeds laytime allowed: Demurrage = (Hours over laytime) × (Demurrage Rate per day / 24)
For example: 36 hours of laytime over, at $18,000/day demurrage rate = 36 × ($18,000/24) = $27,000.
Demurrage claims are a standard part of commodity trade settlement and should be verified against the charter party terms and the actual statement of facts before payment — errors in laytime calculations are common.