Shipping Markets & Commercial Operations
Contracts of Affreightment
Summary
A contract of affreightment (COA) commits a carrier to transport specified cargo volumes across multiple shipments within agreed windows.
Why this matters in ship finance
COAs can stabilise demand but expose the provider to scheduling, bunker, performance and capacity-allocation risks.
The concept
A COA allocates quantity, shipping windows, rate adjustment, laytime and non-performance risk under its negotiated terms; it is not equivalent to a period time charter.
How it is used in practice
Map committed tonne-miles against available ships and voyage costs; test vessel substitution, delays, bunker escalation and counterparty default.
Practical issues
Do not treat gross COA revenue as fixed cash flow without analysing nominations, flexibility clauses, capacity cover and exceptions.
How ShipFinance.ai uses this concept
Build COA utilisation and margin scenarios across a fleet rather than a single vessel.
Key takeaways
- Cargo commitments can improve visibility without removing cost risk.
- Operational flexibility depends on nominated terms.
- Fleet allocation must support contracted volumes.