What Is Demurrage?
Demurrage is a fee charged to the charterer by the shipowner when a vessel is delayed at port beyond the agreed laytime for loading or discharging cargo.
In simple terms, demurrage is a penalty for using the vessel longer than allowed. These charges compensate the shipowner for lost time and revenue due to delays caused by the cargo owner, terminal, or port logistics.
When Does Demurrage Apply?
Demurrage typically applies under a voyage charter, where the charterer hires a vessel to transport cargo between ports. The charter party contract outlines:
- Laytime allowed (e.g., 5 days to load/discharge)
- Demurrage rate (e.g., $15,000 per day)
- Start of laytime (often begins when the Notice of Readiness, or NOR, is tendered)
If port operations exceed the agreed laytime—and no exceptions apply—demurrage charges begin automatically.
How Is Demurrage Calculated?
- Determine Laytime Allowed
Defined in the charter party in hours or days. - Track Actual Time Used
Based on the port’s Statement of Facts (SOF). - Subtract Laytime from Actual Time
The difference is the time on demurrage. - Multiply by the Demurrage Rate
Final charge = time on demurrage × rate.
Example:
- Laytime: 96 hours
- Time used: 120 hours
- Rate: $625/hour
- Demurrage = (120 - 96) × $625 = $15,000
Demurrage vs. Despatch
| Term | Who Pays Whom | When It Happens |
|---|---|---|
| Demurrage | Charterer pays Shipowner | When laytime is exceeded |
| Despatch | Shipowner pays Charterer | When laytime is saved |
Common Causes of Demurrage
- Delays in cargo readiness
- Port congestion
- Weather (unless contractually excluded)
- Documentation or customs issues
- Miscommunication among stakeholders
- Incorrect or late NOR submission
How to Avoid Demurrage
- Understand and negotiate favorable charter party terms
- Ensure cargo is ready before vessel arrival
- Submit NOR correctly and on time
- Track laytime with precision
- Communicate consistently with agents and terminals
- Train your operations team on demurrage best practices
Looking for a step-by-step guide? Read our full post on How to Avoid Demurrage Charges.ead our full post on How to Avoid Demurrage Charges.
Why Demurrage Matters
Demurrage can erode profit margins fast. Even a single day of delay can cost tens of thousands of dollars. Mastering demurrage helps you:
- Avoid costly penalties
- Improve voyage planning
- Strengthen relationships with owners and terminals
- Take control of your commercial operations
Ready to Reduce Your Demurrage Exposure?
At Haugen Consulting, we help clients across the shipping and trading industry reduce demurrage costs through:
- Demurrage audits
- Contract and laytime clause analysis
- Onsite and online training
- Dispute resolution and claims support
Whether you're new to demurrage or looking to train your team, we’ve got you covered.
Explore Our Courses:
- Introduction to Demurrage – Learn the basics and build confidence in handling laytime.
- Advanced Demurrage – Dive into complex calculations, clauses, and real-world case studies.
Have questions or need tailored support? Contact us today to speak with an expert.
