A ship chartering Malaysia is a financing method whereby the lessor buys a ship from a shipbuilder based on the specific needs of the lessee and then leases the ship to the lessee for use, with the lessee paying rent in installments. During the lease period, the ownership of the ship still belongs to the lessor, but when the lease period expires and the rent has been paid, the lessor will fulfil some or all of his obligations under the finance lease contract and the ownership of the ship will be transferred to the lessee in accordance with the provisions. 

In this way, the lessee is able to use the funds in installments while addressing operational needs, and the financier receives a more lucrative return and a more reliable security of claim, so that both lessees can successfully achieve a win-win outcome.

Factors to be considered for ship chartering 

1. Shipping enterprise financing factors

Ship shipping investment and risk are relatively high, the return income is correspondingly low, the purchase of ships need a lot of funds, and the ship purchase funds will be related to the survival and development of shipping enterprises. Therefore, the capital for purchasing ships is an important factor.

2. Currency risk

Exchange rate risk refers to the risk arising from the fluctuation of currency exchange rates involved in the chartering of a ship in a situation where the currency exchange ratio fluctuates up and down and is unstable. In the course of a chartering transaction, if a ship changes hands between the chartering parties, two or more types of currency transactions are created and exchange rate risk is created. However, such risks can be avoided if both parties to the transaction use the same currency. The simplest method of chartering at present is to use the same currency exchange, so that there is no exchange rate risk.

3. Ship quality risk

Quality risk refers to certain product defects that arise during the manufacturing process of a ship due to the shipbuilder’s workmanship, affecting the quality of the ship. This risk is often found in newbuilding ship finance leases, where the ship charterer can simply refuse to lease the ship or delay payment because of the defects when the ship is found to have quality problems, which creates a risk for the ship owner. In order to avoid such a situation and reduce disputes and risks, both charterers should draft a charter contract in advance, in which they should explain their responsibility for the risks and ways of dealing with the defects of the newly-built ship, and specify who and how to pursue responsibility and recover compensation from the ship manufacturer, referred to as the right of claim.