What is a spot charter?
A spot charter is a deal for one voyage, fixed at today’s market freight rate. The ship loads promptly or soon after. Neither side commits to anything longer. The price is checked against the Baltic Exchange index for that route.
Spot is a market. It is the same contract as any other voyage deal. You almost always write a spot fixture as a voyage charter on a GENCON-family form. What makes it spot is the timing. The cargo is ready now, and the rate follows today’s spot index. Nobody agreed it weeks or months earlier. In dry bulk, the Baltic Exchange publishes daily reference rates that anchor these talks. Two examples are C3 (Tubarao to Qingdao Capesize) and C5 (West Australia to Qingdao Capesize).
Spot exists because cargoes and ships both turn up unevenly. A charterer may have one cargo ready to go. An owner may have one ship free nearby. The two can agree a deal within hours. The price is found quickly and the commitment is short. The deal works only if the rate is competitive with what brokers report on the chartering negotiations screen that day.
How a spot charter works in practice
The charterer sends the cargo order out through one or more brokers. The laycan is usually tight, inside the next two to three weeks. Owners with ships free in the loading area reply with rate offers. The broker compares each offer with the relevant Baltic index. The charterer counters. The deal closes when one owner takes the cargo at a rate both sides accept. For a Capesize or Panamax, the whole cycle from cargo order to recap often takes 24 to 48 hours. It works like any voyage charter, only faster.
The owner pays for bunker fuel, port costs and crew on a spot voyage, as on any voyage charter. You, the charterer, pay freight at the rate fixed on the day of the deal. That holds even if the spot market moves 20 pct against you before loading. The rate is normally quoted in USD per tonne and paid on the bill of lading quantity. Our freight rate guide shows how owners build a per-tonne quote from their TCE target (daily earnings) and bunker cost. Some spot cargoes have an uncertain stowage factor, such as mixed scrap. These are sometimes fixed as a lump-sum charter, with one fixed total sum in place of a per-tonne rate.
You track performance as on any voyage charter: notice of readiness, laytime, statement of facts, and demurrage for any overrun. The difference on spot is the tight laycan. The cancelling clause really matters, and any delay on the ballast leg can kill the deal. Owners’ brokers build that risk into the rate.
| Cost or risk axis | Owner exposure | Charterer exposure |
|---|---|---|
| Bunker | Owner | None |
| Port costs and disbursements | Owner | None |
| Canal dues and towage | Owner | None, unless you agree a deviation |
| Off-hire | Does not apply (no hire) | Does not apply |
| Demurrage and despatch | Owner pays despatch | Charterer pays demurrage when laytime runs over |
| Weather and routing | Owner (the owner chooses the route) | None |
| Cargo claims | Owner (Hague-Visby liabilities) | None |
| Crew | Owner | None |
| Maintenance | Owner | None |
Spot charter vs time charter
The real difference between spot and time is how long you commit. The contract form matters less. A spot fixture commits you to one voyage at today’s rate. A time charter commits you for months or years at a daily rate. Spot leaves you exposed to swings in freight rates. Time charter can leave you locked into the wrong rate for the wrong length of time.
| Spot charter | Time charter | Contract of affreightment | |
|---|---|---|---|
| Who runs the voyage | Owner | Charterer | Owner, as each lift is nominated |
| Who pays bunker | Owner | Charterer | Owner |
| Who pays port costs | Owner | Charterer | Owner |
| Hire or freight basis | USD per tonne, set by the spot index | USD per day | USD per tonne, agreed when the COA is signed |
| Cargo risk | Owner (Hague-Visby) | Charterer | Owner |
| Time risk | Owner, outside laytime | Charterer | Owner, voyage by voyage |
| Typical duration | One voyage | Months to years | 12 to 36 months of lifts |
| Best for | One cargo at today's rate | A steady cargo programme and control of the ship | Repeat cargoes at a known rate |
Choose spot for a one-off cargo on a route with plenty of ships, when you want today’s rate and no future commitment. Choose a time charter when you ship often enough that controlling a vessel for a quarter or longer costs less than fixing voyage by voyage. You also need the team to run the ship yourself. Choose a contract of affreightment for repeat cargoes when you do not want to run the ship. The COA sets one per-tonne rate for the whole programme, and the owner keeps the bunker bill.
Risk allocation between owner and charterer
A spot fixture is written as a voyage charter, so the risk split is the same as in the table above. Two clauses matter most on a spot deal: the cancelling clause and the demurrage rate.
The cancelling clause is usually GENCON 2022 clause 9. It lets you, the charterer, walk away if the ship is not ready at the load port by the cancelling date. Spot laycans are often only three or four days wide, so this clause is a real risk for the owner. Owners chasing a deal often rush the ballast leg to make a tight date. A missed cancelling date can cost the owner the whole voyage’s income. So owners add a premium to the spot rate for a tight laycan. Brokers can usually put a number on that premium against the relevant Baltic index.
The demurrage rate is the second pressure point. On spot, demurrage should match what the ship could earn elsewhere (its next-best TCE). The ship’s running cost is too low a benchmark. Capesize TCE on the main iron ore routes has ranged from the high teens to the mid-thirties USD per day in recent quarters. Demurrage rates of USD 25,000 to 40,000 per day are typical. Demurrage set too low moves the risk of port congestion from charterer to owner, with nothing paid for it. The Baltic Exchange and INTERCARGO commentary track the main TCE range, and brokers use it as their benchmark.
Worked fixture example
Panamax Australian coal, prompt spot fixture
- Cargo
- 75,000 mt thermal coal, 5 pct molo
- Lane
- Newcastle region to South Korea east coast
- Parcel size
- 75,000 mt
- Laycan
- March 2026, 5 day window
- Freight rate
- USD 11.80 per tonne
- Demurrage
- USD 22,000 per day, pro rata
- Key clauses
- GENCON 2022, FIO, 72 hours total laytime SHINC, BL freight prepaid
The route is around 4,800 nautical miles one way. At USD 11.80 per tonne on a 75,000 tonne cargo, gross freight is around USD 885,000. The owner then pays bunker (roughly 1,200 mt for the round trip) and port costs, with no canal on the route. That leaves a TCE in the high teens USD per day for a modern Panamax in March 2026. This is broadly in line with the Baltic Exchange Panamax basket for the period.
The 5 day laycan shows this is a spot deal. The ship was free in North China after its last fixture. The ballast run to Newcastle was tight against the cancelling date. The owner accepted the laycan and asked for a small premium over the rate the index pointed to.
Demurrage is USD 22,000 per day. It is set on purpose above the ship’s running cost. That covers what the owner could lose if the discharge port gets congested. Freight is paid up front because the receiver was a trading house with little credit history with this owner.
Common mistakes and misuse
- Treating spot as its own contract form. A spot deal is a voyage charter fixed at prompt rates. The same GENCON clauses apply. You must negotiate any changes you want into the recap.
- Comparing with the wrong Baltic index. C3 prices iron ore from Brazil to China. A thermal coal cargo from Newcastle to Korea priced against C3 gives meaningless numbers. Match the cargo and route to the right index basket.
- Ignoring the cancelling date on a tight ballast leg. A four-day laycan after a 6,000 nautical mile ballast leg is a coin flip on weather and bunker supply. Owners should add a premium for it. Charterers should think about widening the window.
- Forgetting that spot rates move during the day. The recap records the rate at the moment you fix. The Baltic indices can move 5 to 10 pct in a single trading day. Check the rate against the closing index, or you may leave money on the table or pay above market.
- Setting demurrage too low. Demurrage at the ship’s running cost pays the owner nothing for lost earnings when a discharge port congests. Set it against the next-best TCE.
- Skipping the voyage estimate. A spot rate can look good per tonne and still lose money once you count bunker and canal dues properly. A two-line voyage estimate is the minimum check before you fix.
When a spot charter is the right choice
Spot is the right answer for a single cargo, when you want today’s rate and have no longer programme to protect. It also makes sense when the Baltic indices are moving in the charterer’s favour. A period rate would then mean paying too much. A charterer with ten cargoes a year on the same route will usually pay less over the cycle with a contract of affreightment or even consecutive voyages. Ten separate spot fixtures tend to cost more.
Spot deals are also easy to hand over if you ship now and then and have no chartering team. Our ship chartering company can run the whole spot fixture for you, from cargo order to recap, against the current Baltic basket.
Scope and what this page does not cover
This page explains what the spot market is and how a spot deal gets fixed. It does not forecast freight rates for any route or comment on how the Baltic Exchange builds its indices. It is no substitute for a live broker quote. For current rates, ask a broker working from today’s Baltic data. To charter a bulk carrier for a prompt cargo on the spot market, get a quote. We will run the fixture from cargo order to recap.