Neptune Atlas

Negotiation

Firm offers, counters and subjects

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Between an enquiry landing on a desk and a ship being fixed is a sequence of steps with its own vocabulary, and the words are not decoration. An indication commits nobody. A firm offer can be accepted into a contract. A fixture on subs is reported to the market as a fixture and is not one yet. Knowing which rung you are on is most of the discipline of negotiating.

The ladder

StepWhat it isWhat it binds
EnquiryA cargo exists and the market is being asked what it costs Nothing. It has usually gone to several brokers at once.
IndicationA view of the rate, given informally Nothing. It is information, and it is where most conversations stop.
Firm offerNamed parties, full terms, and a time by which it must be answered The offeror, for the life of the validity. Capable of being accepted.
CounterThe same in reply, with some terms changed The offer it answers is dead. The counter is now the live offer.
Main terms agreedThe commercial terms are settled Everything except the outstanding subjects and the detailed wording.
On subsAgreed, with named conditions outstanding The ship is off the market in practice. Nothing is concluded in law.
Subs liftedThe conditions are declared satisfied A clean fixture. Both sides are committed.
Details and charterpartyThe full wording, drawn on the agreed form The contract in its final shape, recording what the recap already agreed.

An indication costs nothing, and that is its use

Most of what passes between brokers all day is indications. What do you think for a Handy out of West Coast India in the second half of the month. Where would you value her. Nobody is committed and both sides know it, which is exactly why the information flows: an owner will tell a broker what he thinks a ship is worth long before he will offer her.

The failure mode is treating an indication as a quote. A charterer told sixteen dollars a tonne informally and then offered eighteen firm has been given two honest numbers a week apart, and will remember only the first. Say which one you are giving.

What makes an offer firm

Three things: the parties are named, the terms are complete enough to be accepted as they stand, and there is a time by which the answer must come.

WE OFFER FIRM SUBJECT TO REPLY 1600 HRS SINGAPORE TIME TODAY:

ACCOUNT   : OCEAN HARVEST TRADING PTE LTD, SINGAPORE
VESSEL    : MV ALKA STAR, 37,500 DWT ON 10.20 M SSW, BLT 2016
            GEARED 4 X 35 T WITH GRABS, 5 HO/HA
CARGO     : 30,000 MT 5 PCT MOLOO CEMENT CLINKER IN BULK
LOAD      : 1 SB KANDLA
DISCH     : 1 SB KRISHNAPATNAM
LAYCAN    : 08/14 OCT
FREIGHT   : USD 18.50 PMT FIOST BENDS
LAYTIME   : 10,000 MT PWWD SSHINC LOAD / 6,000 MT PWWD SSHINC DISCH
DEM/DES   : USD 14,000 PDPR / HALF DEM BENDS
COMM      : 3.75 PCT ADDCOM PLUS 1.25 PCT
OTHERWISE : GENCON 1994 AS AMENDED
SUB       : SHIPPERS APPROVAL, OWNERS MANAGEMENT APPROVAL

The validity time is the part newcomers under-read. It exists because an offer holds something: for those hours the owner has taken the ship out of other conversations and will not offer her elsewhere. That is worth a real cost to him, so the window is short, often minutes rather than hours in a moving market, and it names a time zone because the two desks are rarely in the same one.

An offer that expires unanswered is simply gone. There is no obligation to extend it and no grievance in refusing to, although in practice a broker asks. What you must not do is let it lapse silently while waiting for your principal: tell the other side that a reply is coming and ask for more time, because the alternative is an owner who thinks his ship was left hanging.

A counter kills the offer

This is the single rule most worth learning early. Replying to a firm offer with anything other than clean acceptance terminates it. The original is dead, it cannot be accepted afterwards, and what now sits on the table is your counter, with your own validity attached.

Two consequences catch people out. Accepted except is a counter, not an acceptance, however small the exception. And once you have countered you cannot change your mind and take the original: if the market moved against you in the twenty minutes since, the other side is entitled to say the earlier number is no longer available, and frequently will.

So a counter is an act with a cost, and it is worth putting everything you want into one rather than dripping changes out over three rounds. A negotiation that goes eight exchanges over small items is one where somebody has not decided what they actually need.

COUNTER, SUBJECT REPLY 1730 HRS SINGAPORE TIME:
- FREIGHT USD 16.75 PMT
- LAYCAN 10/16 OCT
- DEM USD 12,000 PDPR
- ALL ELSE AS OFFERED

ALL ELSE AS OFFERED is doing real work in that message. It says the other twelve lines are accepted and only these three are in dispute, which narrows the argument and lets both principals see the gap. A counter that restates every term from the beginning invites a fresh reading of terms that were already agreed.

Subjects

When the commercial terms are settled the deal goes on subs: agreed, but conditional on things that are still outstanding. The ship comes off the market, the desk reports her as fixed on subjects, and nobody is yet committed. There are broadly two kinds and they deserve different treatment.

SubjectWhat is outstandingHow to read it
Sub stemThe cargo is confirmed available at the load port for the dates Genuine and usually quick. It fails when the shipper cannot produce the cargo in the window.
Sub shippers or receivers approvalA party outside the negotiation has to accept the ship Genuine. Ask how long it takes at that terminal, because the answer varies from an hour to several days.
Sub management or board approvalThe counterparty’s own internal sign-off Usually genuine on a large fixture and sometimes a polite way of keeping an option open. Judge it on who you are dealing with.
Sub detailsThe full charterparty wording The widest of them. Until details are agreed there is generally no binding contract at all, and this subject can swallow the whole deal.
Sub charterers approval of the vesselInspection, vetting, or a look at her record Real, and worth pinning to a deadline: an open-ended approval is an option to walk away.

The important structural point is that a subject held by one side is an option that side holds and the other side does not. Whoever holds the subs can walk away for nothing while the counterparty is committed in practice, which is why a broker should ask what the subject actually is, who lifts it, and by when.

Lifting, and the deadline

Subjects are lifted when the party holding them declares them satisfied. Once all are lifted the fixture is clean, both sides are committed and the recap becomes the record of the agreement.

A time for lifting belongs in the recap and is left out constantly. SUBS TO BE LIFTED LATEST 1700 HRS 03 OCT converts an open-ended option into a deadline, and its absence is how a ship sits idle for four days on a deal that was never going to happen. If the counterparty resists putting a time on it, that is itself information about how firm the deal is.

What happens on a lift is worth being precise about too. Subs are lifted, not partially lifted. A message saying subs are lifted except for one is a request to vary the deal and should be answered as one.

Failed on subs

Deals fail at this stage regularly and it is not a scandal. The cargo did not appear, the receiver would not take that ship, the internal approval did not come. Two habits are worth building around it.

Report it. A fixture that goes on subs and fails is reported to the market as fixed and failed. Suppressing it leaves competing brokers working a cargo that has moved on, and they find out anyway.

Keep the record. A failed negotiation is one of the more useful things a desk owns. It carries what that charterer wanted, what they were prepared to pay, whose ships they refused and why, and it is the first thing worth reading when the same account calls again next month. A negotiation that only ever existed in a mail thread is one nobody can find in six weeks.

Keeping the numbers straight while it moves

A live negotiation changes a handful of numbers several times an hour across two or three counterparties, and the mistakes that cost money are almost never analytical. They are a stale demurrage figure carried into a counter, a laycan that moved on one side of the chain and not the other, or an owner quoted at a rate the desk had already improved.

The habit that prevents it is boring: write the current state down after every exchange, in fields rather than in prose, and make that the thing both brokers read from. When the deal concludes, that record is most of the recap already written.

References

The fixture recapThe e-mail that says what was agreed. Written in minutes, read by a tribunal years later, and the contract until the charterparty is drawn. How to read a cargo enquiryThe e-mail saying a charterer needs something moved, walked field by field, and why an enquiry is not an offer. Laycan: laydays and cancellingTwo dates doing opposite jobs: the earliest a charterer must accept the ship, and the latest they may walk away from her. Chartering abbreviationsThe abbreviations on a circular, an enquiry and a recap, grouped by where you meet them, and what each one commits you to.

Neptune Atlas

A fixture in Neptune Atlas moves through negotiating, on subs, fixed, failed and completed, and it carries the vessel, the cargo, the parties, the rate and its basis, the laycan and the demurrage figure as fields from the first counter onwards. A negotiation that fails stays on the book as a failed fixture rather than disappearing, which is the record a desk wants the next time that charterer calls. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

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