Relet

Relet and the margin over hire

Published 18 October 2026

A relet is a ship you do not own, chartered in on time charter and chartered out again to someone else. You pay hire, a fixed amount per day, to the owner above you. You earn freight, or hire, from the charterer below you. Your profit is the difference. The estimate for a relet looks like any voyage estimate with one extra line, and that one line changes what the daily figure at the bottom means.

Who is who in a relet

There are three parties. The head owner owns the ship, or controls it, and lets it on time charter. The middle party takes the ship on that time charter and becomes its disponent owner: it does not own the ship, but it can dispose of the ship's time and fix it out as if it were the owner. The sub-charterer is the cargo side, which charters the ship from the middle party, often on a voyage charter. When the middle party lets the ship out on a time charter on the same terms, the two contracts are called back-to-back.

The extra line: hire on every day

In an owner's estimate, the voyage costs are bunkers, port costs and other costs of the voyage. In a relet estimate the hire you pay the head owner is a voyage cost too. It runs on every day of the voyage: at sea, at the berth, and while the ship waits at anchor. A waiting day costs a relet more than it costs an owner, because the owner loses a day of fuel and the relet loses a day of fuel and a day of hire.

Under a time charter the charterer also buys the fuel and pays the ports, so in a relet you carry the whole voyage cost yourself. The head owner carries the ship's running costs: crew, insurance, maintenance. Those are already inside the hire rate.

Two daily figures, and which one you are looking at

A relet estimate can show two different daily numbers, and mixing them up is the most common mistake on the sheet.

TCE before hire. Net freight less the voyage costs without the hire, divided by the voyage days. This is the same figure an owner would see. It tells you what the voyage is worth per day to whoever has the ship.
Margin over hire. Net freight less the voyage costs and the hire, divided by the voyage days. This is what is left for you per day after paying the head owner.

The two always differ by exactly the hire rate, plus any commission on the hire. If the TCE before hire is 13,150 and the hire is 12,000, the margin is 1,150 a day.

Why break-even shows only a few dollars

A break-even freight is the freight at which the voyage result after hire is zero. It covers the voyage costs and the hire, and nothing more. So at break-even the margin over hire is close to zero by definition: a few dollars a day, from rounding the freight to the cent. That is not a broken estimate. It is the estimate telling you that at this freight you pass all the money to the head owner and keep none. The TCE before hire, at the same freight, is about the hire rate. Look at that figure when the question is "what does the voyage earn per day".

A worked example

The figures are illustrative round numbers, not a market quote.

Ship taken in at 12,000 a day. Fixed out for 40,000 mt.
Voyage of 40 days. Illustrative figures only.

Voyage costs before hire (bunkers, ports, other)    500,000
Hire, 40 days x 12,000                               480,000
Total costs                                          980,000

Break-even freight
  Net freight needed                                 980,000
  Gross, before 5.00% commission                   1,031,579
  Per tonne, on 40,000 mt                              25.79

At 25.79 a tonne
  Gross freight   40,000 x 25.79                   1,031,600
  Net freight     after 5.00% commission             980,020
  TCE before hire  (980,020 - 500,000) / 40           12,001
  Margin over hire (980,020 - 980,000) / 40          0.50 a day

At 27.00 a tonne
  Gross freight   40,000 x 27.00                   1,080,000
  Net freight     after 5.00% commission           1,026,000
  TCE before hire  (1,026,000 - 500,000) / 40         13,150
  Margin over hire (1,026,000 - 980,000) / 40          1,150 a day

Every dollar a tonne on the freight is 38,000 of net freight on this voyage, or 950 a day. That is the number to hold in your head when the charterer counters.

Comparing several hire rates

When you are negotiating the hire with the head owner at the same time as the freight with the charterer, run the break-even freight at more than one hire rate. On the voyage above, each 500 a day of hire is 20,000 over 40 days, about 0.53 a tonne gross. A table of hire rates against the freight each one needs shows both negotiations on one page.

Risks in the middle of the chain

A relet looks safe when the terms down the chain match the terms up the chain. They often do not match, and the middle party carries the gap. P&I clubs name these as the usual ones:

Delivery and the rest of the charter are different duties. On delivery the ship must be fit for the service, a strict duty. During the charter the owner must use due diligence to maintain it. If the cranes fail on delivery to your sub-charterer, you may be liable to them but have to prove a lack of diligence against the head owner.
Speed and consumption. Unless the head charter makes the warranty continuing, it applies only on delivery. A ship that slows down during the head charter can leave you warranting a speed to your sub-charterer that you cannot recover upstream.
Hold cleaning, safe port, bunker specification, time bars and the law and arbitration clause. Each one that differs between the two contracts is a place where a claim can stop in the middle.
Two disputes about one event. A claim can mean one arbitration with the head owner and another with the sub-charterer, with costs that are not always recovered.

The practical answer is to read the two contracts side by side before fixing, clause by clause, and to price the relet with a margin that pays for the gaps you could not close.

Other hire-side costs

A time charter has small costs that an owner's estimate does not: a sum per 30 days for communications, entertainment and victualling, a lump sum in lieu of hold cleaning at redelivery, and extra war risk premium on some routes. They are small next to the hire, but on a tight relet they can be the whole margin. See ILOHC, CEV and other time charter extras.

References

West of England P&I Club, Defence guide: Disponent owners' contractual risks in a nutshell, 2019. westpandi.com
Steamship Mutual, Better watch your back-to-back: understanding back-to-back charterparties, key risks and considerations for members, republished January 2026. hellenicshippingnews.com
Veson Nautical, VMS: Estimate (Voyage), on daily hire as an input to a voyage estimate. help.veson.com

How to do a voyage estimate, step by stepNine steps from a cargo enquiry to a daily figure, with a worked example, and how to turn the sum round when you know the daily rate you want and need the freight. Time charter equivalentFreight per tonne cannot be compared with hire per day until you divide it by the voyage. This is the arithmetic that does it. Voyage charter vs time charterHow the two main charter types split the risk, what each side pays for, and which terms exist in only one of them. Who is who on a fixtureA dozen parties, several called the owner and two called the agent. Who gives instructions to whom, and who you may phone. ILOHC, CEV and other time charter extrasThe small sums in a time charter that are not hire: hold cleaning in lieu, a monthly sum for communications and meals, war risk premium. How each one is charged.

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