Mark Franklin, VP Commercial
Importance of accurate port cost predictions for chartering teams
Inaccurate predictions of port costs can pose challenges when calculating voyage expenses, as these costs form a significant portion of overall expenses. Accurate calculations enable chartering teams to estimate potential voyage profits more precisely.
Substantial savings can be achieved by understanding the factors that influence tariff-based calculations.
It is increasingly evident that port costs should be analysed at the terminal or berth level. Costs can vary significantly between different terminals within a port. However, port-level information is typically used due to the unavailability of terminal-level data during cargo fixation.
Four methods of calculation significantly impact port costs
Our studies on tariff structures have identified four primary methods of calculation that influence overall port costs.
1. Linear cost profile: Typically, ports exhibit a linear cost profile, where costs increase proportionally to the time a vessel spends alongside. Longer stays result in higher costs.
2. Time threshold cost increase: Some tariffs exhibit a significant cost increase after a specific period of time alongside, such as 72 hours. Monitoring these thresholds is crucial when opportunities to sail within the initial period arise.
3. Stepped cost: In the case of stepped cost tariffs, costs increase in slabs, resembling a step-like graph. Analysing these tariffs can lead to potential savings by departing before the next slab jump or determining if overtime payments are warranted.
4. Fixed Cost Tariffs: Fixed cost tariffs are less common, where costs only marginally increase if the stay exceeds the expected duration. Identifying such tariffs can provide insights into ideal locations for making repairs, knowing that costs remain relatively stable irrespective of time spent.
Considerations and variables in tariff structures
Understanding how costs behave and change over time is crucial for informed decision-making. Knowledge of cost increases or decreases at various points is vital. However, tariff structures encompass numerous variables, including vessel type, size, previous or subsequent ports, frequency of calls, flag state, environmental ratings, and more.
These variables continually evolve, and we strive to incorporate them into our daily operations for our DA-Desk customers.
If you’d like to read more, make sure you check out our recent post on the best questions to ask when you choose a disbursement accounting automation partner.
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