Speed and fuel consumption quotations in ocean shipping time charter contracts

A.W. Veenstra, J. van Dalen

This paper presents an exploration of the process of setting warranted speed and consumption in ocean shipping time charter contracts. We formulate a conceptual model in which warranted speed and consumption are related to actual speed and consumption, and ultimately to a speed and consumption claim. We formulate hypotheses concerning the explanation of warranted and consumption from various contract terms. We then present an analysis of time charter fixture data and technical ship details and an empirical model for warranted speed and consumption on the basis of which we test the hypotheses. The analysis shows that, although there are some obvious reasons for a large number of differences in warranted and design speed and consumption, such as the age of the ship, there is also evidence that shipowners exhibit strategic behavior in quoting warranted speed and consumption in time charter contracts that reflect the development of the market.

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