What is demurrage?
A daily charge payable when loading or discharging takes longer than the agreed laytime. On bulk cargoes it can move the economics of a shipment materially, which is why laytime terms belong in the contract, not the covering email.
Demurrage explained: laytime, despatch and why bulk shipping is charged by the day
Laytime is the time a charter allows to load and unload a ship. Go past it and the charterer pays the shipowner demurrage for every extra day — and it is not small: Capesize ships were earning more than US$40,000 a day on the spot market in late 2025, so two weeks of waiting costs US$560,000 before a tonne moves. The days add up in queues at ports, canals and war zones, from Hormuz and the Red Sea to Panama and the coal ports. Load faster than agreed and the shipowner may pay despatch instead, often half the demurrage rate. Time is a cost in every bulk deal: in bulk trade, time is money, charged by the day.
Key points
- Liquidated damages for detaining the vessel, not a penalty.
- Accrues by the hour once laytime is exhausted.
- Most disputes turn on when laytime started and what interrupted it.
At a glance
| What it is | Daily charge for exceeding laytime |
|---|---|
| Paid by | Charterer to shipowner |
| Pro-rated | By the hour |
| Opposite | Despatch, usually half the demurrage rate |
| Common flashpoints | Notice of readiness, berth availability, weather working days |
How demurrage arises
A charter party allows a fixed amount of time — laytime — for loading and discharging. If operations take longer, the charterer pays the shipowner demurrage at an agreed daily rate, pro-rated by the hour.
It is not a penalty. It is liquidated damages for detaining the vessel, which is why it is generally enforceable without proof of actual loss.
What it costs
Rates track the freight market and vessel size. On a Supramax or Panamax bulk carrier, demurrage running for several days can consume the margin on a marginal cargo entirely, which is why laytime terms deserve as much attention as price.
The mirror image is despatch, a payment from owner to charterer for finishing early — usually at half the demurrage rate, and often waived on commodity fixtures.
Where the disputes are
Almost all demurrage disputes turn on when laytime started and whether it was interrupted. Notice of readiness, berth availability, weather working days and the treatment of Sundays and holidays are the recurring flashpoints.
The practical defence is precision: define laytime in hours, state exactly what suspends it, and agree the notice-of-readiness mechanics before the vessel sails rather than while it waits.
Frequently asked questions
- What is demurrage in shipping?
- A daily charge the charterer pays the shipowner when loading or discharging exceeds the agreed laytime. It compensates the owner for the vessel being detained.
- Who pays demurrage, the buyer or the seller?
- Whoever bears the laytime obligation at that end of the voyage under the sale contract. Under FOB the seller normally controls loading and the buyer the discharge, but the contract governs — the Incoterm alone does not settle it.
- What is the difference between demurrage and detention?
- Demurrage relates to time at the berth or port beyond laytime. Detention generally refers to keeping equipment — typically containers — beyond the free period outside the terminal.
Related terms
The window of days within which the vessel must arrive and be ready to load. Miss the laycan and the charterer may cancel; arrive early and the vessel waits at the buyer’s or seller’s expense depending on terms.
The seller delivers the goods on board the vessel at the named load port and clears them for export. Risk and cost transfer to the buyer once the cargo is loaded, so the buyer arranges and pays for ocean freight and insurance.
The seller pays for carriage to the named destination port, but risk transfers to the buyer when the goods are loaded at origin. The seller does not insure the cargo — that gap between cost and risk is the difference buyers most often miss.
The document issued by the carrier that serves as receipt for the cargo, evidence of the contract of carriage, and — critically — a document of title. Whoever holds the original endorsed bill controls the goods.
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