TCE (Time Charter Equivalent)

TCE (Time Charter Equivalent): Time Charter Equivalent is one of the most important performance measures in ship chartering because it converts the commercial result of a voyage into a daily earning figure. Shipowners, operators, Charterers, shipbrokers, lenders, investors, and market analysts use TCE to compare voyage charter earnings with time charter hire and to decide whether a proposed voyage is commercially attractive.

TCE (Time Charter Equivalent) is especially useful because voyage charters and time charters are structured differently. Under a voyage charter, the Shipowner normally earns freight and pays voyage-related expenses such as bunkers, port charges, canal dues, agency fees, commissions, and sometimes additional insurance premiums. Under a time charter, the Shipowner normally receives a fixed daily hire, while the Time Charterer pays for bunkers and most voyage expenses. TCE creates a common daily basis for comparison between these two different forms of employment.

TCE (Time Charter Equivalent) is calculated by subtracting voyage expenses from voyage revenue and then dividing the result by the total duration of the voyage. The result is expressed as a daily rate, usually in United States dollars per day. A Shipowner can then compare that daily result with the available time charter market, the ship’s daily operating costs, and alternative voyage opportunities.

The standard formula is:

TCE (Time Charter Equivalent) = (Voyage Revenue - Voyage Expenses) ÷ Total Voyage Days

This formula appears simple, but the quality of the result depends entirely on the accuracy of the assumptions. If bunker consumption is underestimated, port costs are outdated, commissions are forgotten, port time is too optimistic, or canal charges are omitted, the TCE result will be misleading.

What is TCE (Time Charter Equivalent)?

What is TCE (Time Charter Equivalent)? Time Charter Equivalent is a normalized shipping earnings measure that shows how much a ship earns per day from a voyage after deducting voyage-related expenses. It is used to compare different voyages, different ships, different charter types, and different route options on a common daily basis.

For example, a voyage charter may produce gross freight of USD 1,200,000. That figure alone does not show whether the voyage is profitable. The Shipowner must deduct bunker costs, port charges, canal fees, agency expenses, commissions, insurance extras, and other voyage costs. The remaining amount must then be divided by the total number of voyage days. Only then can the Shipowner see the daily earning level of the voyage.

TCE is widely used in dry bulk, tanker, gas, container, project cargo, and other shipping sectors, although the exact cost items and freight calculations may differ between markets. In dry bulk chartering, TCE helps compare cargoes and routes. In tanker chartering, TCE helps evaluate spot voyages, Worldscale fixtures, cargo heating obligations, and extra insurance exposure.

Why TCE (Time Charter Equivalent) Matters

TCE (Time Charter Equivalent) matters because freight alone can be deceptive. A high freight rate may produce a poor daily return if the voyage is long, the ballast leg is large, bunker prices are high, ports are expensive, canals are costly, or port delays are expected. Conversely, a moderate freight rate may produce a strong TCE if the voyage is short, ports are efficient, bunker cost is low, and the ship is well positioned for the next employment.

TCE helps answer key commercial questions:

  1. Is the voyage worth fixing?
  2. Is a voyage charter better than a time charter?
  3. Which cargo produces the best daily return?
  4. Should the ship ballast to another area?
  5. Should the Shipowner accept lower freight for better positioning?
  6. How sensitive is the voyage to bunker prices?
  7. How much will port delays reduce earnings?
  8. Does the voyage cover daily operating costs?
  9. What is the real earning performance of the ship?
  10. How does the ship compare with the market index?
In practice, TCE is the bridge between voyage estimating and commercial decision-making.

TCE (Time Charter Equivalent) Formula

The basic TCE formula is:

TCE = (Voyage Revenue - Voyage Expenses) ÷ Total Voyage Days

The main components are:

  1. Voyage Revenue: freight, lump sum freight, demurrage income where reasonably expected, or other voyage income.
  2. Voyage Expenses: bunkers, port charges, canal dues, agency fees, extra insurance, commissions where deducted, cargo-related costs, and other voyage-specific costs.
  3. Total Voyage Days: ballast sea days, loading port days, laden sea days, discharging port days, waiting days, canal days, bunkering days, and realistic allowances.
Some companies calculate TCE before deducting brokerage and address commission, while others calculate TCE after deducting them. Some companies show gross TCE and net TCE separately. Therefore, when comparing TCE numbers, it is important to know which deductions have been included.

Freight Income Calculations:

Freight Income Calculations: Freight income is normally calculated by multiplying the expected cargo quantity by the agreed freight rate. This gives the gross freight. Commission and brokerage payable by the Shipowner to brokers or Charterers are then deducted to calculate net freight.

The basic freight formula is:

Cargo Quantity × Freight Rate = Gross Freight

For example:

60,000 metric tons × USD 25 per metric ton = USD 1,500,000 Gross Freight

If brokerage and address commission total 3.75%, the commission deduction is:

USD 1,500,000 × 3.75% = USD 56,250

Net freight is:

USD 1,500,000 - USD 56,250 = USD 1,443,750

This net freight figure is then compared against voyage expenses to calculate the voyage surplus and TCE.

Voyage Revenue in TCE Calculation

Voyage revenue may include freight, lump sum freight, deadfreight, demurrage, and other income directly connected with the voyage. However, expected revenue should be treated carefully. Demurrage should not be included unless it is reasonably expected and recoverable under the Charter Party. Deadfreight should not be assumed unless the Charterer fails to load the agreed quantity and the contractual basis is clear.

Revenue quality matters. Freight that is subject to large deductions, uncertain payment, freight tax, or difficult collection may not have the same value as clean freight payable promptly. A professional TCE calculation should show gross freight, deductions, and net freight transparently.

Voyage Expenses in TCE Calculation

Voyage expenses are the costs incurred because a particular voyage is performed. These expenses vary by route, cargo, port, bunker price, canal use, and Charter Party terms. They are deducted from voyage revenue before calculating TCE.

Common voyage expenses include:

  1. Bunker fuel for ballast passage.
  2. Bunker fuel for laden passage.
  3. Bunker fuel during port stay.
  4. Port charges.
  5. Pilotage.
  6. Towage.
  7. Berthing and unberthing costs.
  8. Canal transit fees.
  9. Agency fees.
  10. Launch services.
  11. Light dues and navigation dues.
  12. Customs and local charges.
  13. War risk additional premium.
  14. Over age premium where applicable.
  15. Extra insurance for navigation limit breaches.
  16. Hold cleaning costs where for Shipowners’ account.
  17. Cargo heating costs where applicable.
  18. Pumping costs where for Shipowners’ account.
  19. Brokerage and address commission where deducted.
  20. Miscellaneous voyage costs.
A voyage estimate should not hide these items inside one broad allowance. Separating them makes the estimate easier to review and improves decision-making.

Ship Operating Expenses and TCE

Ship operating expenses are the fixed or semi-fixed costs of running the ship. They include crewing, repairs, planned maintenance, purchasing costs for stores and lubricants, insurance premiums, and general administration expenses. These costs usually continue regardless of which voyage is performed.

Operating expenses are not the same as voyage expenses. Voyage expenses are deducted to calculate TCE. Operating expenses are deducted after TCE to calculate the ship’s net daily income or operating margin.

Typical operating expenses include:

  1. Crew wages.
  2. Crew travel and welfare.
  3. Provisions.
  4. Maintenance and repairs.
  5. Spare parts.
  6. Stores.
  7. Lubricants.
  8. Hull and Machinery insurance.
  9. Protection and Indemnity insurance.
  10. Class and statutory survey costs.
  11. Technical management fees.
  12. General administration expenses.
Relevant cost elements attributable to the voyage and calculated as daily operating costs must be compared with the income that the voyage generates. This helps determine whether the voyage is financially viable after the ship’s running costs are considered.

What is Daily Operating Costs in Ship Chartering?

What is Daily Operating Costs in Ship Chartering? Daily Operating Costs are the daily expenses required to keep the ship in service. These costs are normally borne by Shipowners and are necessary for maintaining the ship, crew, insurance, class, management, and regulatory compliance.

The main components of Daily Operating Costs include:

  1. Crew wages and provisions: salaries, benefits, travel, victualling, and crew welfare.
  2. Maintenance and repairs: routine maintenance, spare parts, paint, repair work, and drydock planning.
  3. Insurance premiums: Hull and Machinery insurance and Protection and Indemnity insurance.
  4. Lubricants and consumables: lubricating oils, greases, chemicals, and machinery consumables.
  5. Management and administration: technical management, accounting, communication, inspection, and office costs.
  6. Regulatory fees and certifications: class, flag, statutory certification, surveys, and compliance costs.
  7. Miscellaneous expenses: stores, publications, safety equipment, medical supplies, and general ship items.
Daily Operating Costs do not include voyage expenses such as bunkers, port charges, canal fees, or agency fees. This distinction is essential for accurate TCE analysis.

What is Net Daily Income in Ship Chartering?

What is Net Daily Income in Ship Chartering? Net Daily Income is the daily amount left after deducting the ship’s daily operating costs from TCE. It shows whether the ship’s voyage earnings cover daily running costs and produce a surplus.

The formula is:

Net Daily Income = TCE - Daily Operating Costs

For example, if a ship earns a TCE of USD 26,000 per day and daily operating costs are USD 8,000 per day:

USD 26,000 - USD 8,000 = USD 18,000 Net Daily Income

Net Daily Income is more complete than TCE because it considers the cost of operating the ship. However, even Net Daily Income may not include financing costs, depreciation, corporate overhead, or tax effects unless those are added separately.

Gross Daily Rate

A Gross Daily Rate is estimated by dividing the gross voyage surplus or gross voyage revenue by the total number of voyage days, depending on company practice. It gives an early daily figure but does not necessarily show true profitability.

The Time Charter Equivalent (TCE) Rate becomes more meaningful when voyage expenses are deducted and the remaining voyage result is divided by voyage days. Net Daily Income is calculated by deducting Daily Operating Costs from that daily result.

What is Gross Daily Rate in Ship Chartering?

What is Gross Daily Rate in Ship Chartering? Gross Daily Rate is the daily revenue figure before deducting some or all voyage-related expenses. In a voyage charter, it may be calculated by dividing gross freight by total voyage days. In a time charter, it is usually the agreed daily hire.

Gross Daily Rate can be useful for quick comparison, but it is incomplete. It does not show bunker cost, port cost, canal cost, agency fees, commissions, or operating expenses. TCE is therefore a better indicator of voyage performance.

Brokerage Commission and Address Commission

Under a voyage charter, the Shipowner generally pays a brokerage commission to the shipbroker who assists in the fixture. A commonly seen brokerage figure is 1.25% of freight, although actual commission depends on negotiation and market practice. Address commission is a rebate or commission payable by the Shipowner to the Charterer.

Commission must be included in TCE calculation because it reduces net freight. If commission is omitted, the voyage result will be overstated. The estimate should show gross freight, brokerage, address commission, net freight, voyage expenses, voyage days, TCE, and net daily income.

Port Charges and Canal Transit Fees:

Port Charges and Canal Transit Fees: Port costs include port dues for entering ports and using port services, such as towage, pilotage, berth services, line handling, launch services, light dues, security fees, garbage disposal, and other local charges. Since port charges cannot always be assessed easily, companies often use previous port records, port agents, or proforma disbursement accounts.

If a ship calls at a bunkering port, the port disbursements for that bunkering call should also be included. If a ship passes through a canal during the voyage, canal charges must be estimated and included. Canal charges may be based on deadweight, gross tonnage, net tonnage, canal measurement tonnage, cargo type, or ship size depending on the canal rules.

Port and canal costs can significantly affect TCE. A voyage through an expensive canal may save time but increase cost. A longer route avoiding the canal may reduce dues but increase bunker consumption and voyage days. The best route must be tested commercially.

What is Voyage-Related Expenses in Ship Chartering?

What is Voyage-Related Expenses in Ship Chartering? Voyage-Related Expenses are the costs directly associated with carrying cargo from one place to another under a specific employment. They vary from voyage to voyage and are deducted from revenue when calculating TCE.

The main components include:

  1. Bunker (fuel) costs: fuel consumed at sea, in port, during waiting, and during canal transits.
  2. Port charges: port dues, berthing, pilotage, towage, local services, and related expenses.
  3. Canal fees: charges for transiting canals or waterways.
  4. Agency fees: local agent costs for port formalities, documentation, and attendance.
  5. Stevedoring and cargo handling costs: where these are for Shipowners’ account under the Charter Party.
  6. Demurrage or despatch: demurrage may increase income, while despatch may reduce the result.
  7. Additional insurance premiums: war risk, navigation limit breach, over-age, or special route premiums.
Voyage-related expenses should be estimated realistically before the ship is fixed. Underestimating them is one of the most common causes of poor voyage results.

Bunker Costs and TCE

Bunker costs are often the largest voyage expense. They depend on ship consumption, sea speed, distance, port time, bunker price, fuel grade, weather, canal transit, waiting time, and cargo operations. TCE is highly sensitive to bunker prices.

The bunker cost formula is:

Bunker Consumption × Bunker Price = Bunker Cost

For example, if a ship consumes 850 metric tons of fuel and the bunker price is USD 610 per metric ton:

850 × USD 610 = USD 518,500

If bunker price rises or the ship consumes more than expected, TCE falls. This is why voyage estimators test bunker price sensitivity before fixing.

Speed, Consumption, and TCE

Speed has a major effect on TCE. Higher speed may reduce voyage duration but increase bunker consumption. Lower speed may reduce fuel cost but extend voyage time. The best commercial speed depends on freight level, bunker prices, weather, laycan, port congestion, and next employment.

When freight markets are strong, completing the voyage quickly may improve earnings because the ship can fix another cargo sooner. When bunker prices are high and freight markets are weak, eco speed may produce a better result. A professional TCE estimate should compare speed options.

Total Voyage Days in TCE Calculation

Total voyage days include all time required for the employment. They include ballast passage, loading port time, laden passage, discharging port time, waiting, bunkering, canal transit, shifting, weather allowance, and other operational delays.

The formula is:

Total Voyage Days = Ballast Sea Days + Loading Port Days + Laden Sea Days + Discharging Port Days + Additional Allowances

If total voyage days are underestimated, the TCE figure will be too high. Port delays, weather, congestion, slow cargo operations, and canal waiting can reduce TCE materially.

TCE and Voyage Chartering

In voyage chartering, TCE converts freight into a daily earning figure. The Shipowner receives freight and usually pays voyage expenses. The TCE calculation determines whether the freight is sufficient after deducting those expenses.

A voyage with high freight may still produce a weak TCE if the route is long or expenses are heavy. A voyage with moderate freight may be attractive if the ship is already near the load port, port time is short, and expenses are low.

TCE and Time Chartering

In time chartering, the hire rate is already expressed per day. However, Shipowners still compare time charter hire with expected voyage TCE. If spot voyage TCE is higher than available time charter hire, spot trading may be more attractive. If time charter hire is stable and strong, period employment may be preferred.

Time Charterers also calculate voyage economics when they employ a ship under time charter and then carry cargo under voyage terms. In that case, the Time Charterer pays hire and voyage expenses but earns freight. The Time Charterer must calculate whether the cargo produces a positive margin.

TCE and Tanker Chartering

In tanker chartering, TCE is especially important because tanker voyages may involve cargo heating, pumping costs, port expenses, high bunker consumption, extra insurance premiums, and route-specific risk. Under a tanker voyage charter, the Shipowner is often responsible for discharging by using the ship’s own pumps and may also be responsible for heating the cargo where necessary and agreed.

Tankers have self-discharging pumps, and many tankers have heating coils inside cargo tanks to keep cargo in liquid form. Heating cargo consumes energy and can increase voyage cost. A tanker voyage estimate must therefore include cargo heating fuel, discharge pumping requirements, port stay, and any extra insurance obligations.

Extra Insurance Premiums in Tanker Chartering

In tanker chartering in particular, three types of extra insurance premiums may be incurred:
  • Insurance for the event of breaking International Navigating Limits (INL), previously known as Institute Warranty Limits, or International Navigating Conditions. This may apply to areas such as the Baltic Sea or St. Lawrence Seaway in winter.
  • Extra Insurance as War Risk Additional Premium (WRAP), covering the ship’s hull and machinery against war risks.
  • Over Age Premium, which concerns ships classified by underwriters as overage.
These premiums can materially change voyage profitability. The TCE estimate should include them where the Charter Party or voyage route makes them relevant.

What is War Risk Additional Premium (WRAP) in Ship Chartering?

What is War Risk Additional Premium (WRAP) in Ship Chartering? War Risk Additional Premium is an extra insurance premium charged when a ship trades through areas considered risky because of war, piracy, terrorism, sanctions, political instability, military activity, or similar dangers.

WRAP depends on ship type, value, route, cargo, risk area, time spent in the area, and insurance market conditions. If the Charterer orders the ship into a high-risk area, the Charter Party may require the Charterer to pay the additional premium. The wording must be checked carefully.

What is Over Age Premium in Ship Chartering?

What is Over Age Premium in Ship Chartering? Over Age Premium is an additional insurance cost charged for older ships. Underwriters may view older ships as higher risk because of age, wear, machinery condition, survey status, or regulatory exposure.

Older ships may face higher insurance costs, stricter Charterer requirements, more inspections, or reduced commercial acceptance. Over Age Premium should be included in the voyage estimate where applicable.

Who pays the Extra Insurance in Ship Chartering?

Who pays the Extra Insurance in Ship Chartering? Responsibility depends on the Charter Party and the type of charter. In a voyage charter, Charterers may pay extra premiums if the route or port they nominate creates the additional insurance requirement. In a time charter, Charterers may pay premiums caused by their employment orders, while Shipowners may remain responsible for premiums connected with ship age or condition. In a bareboat charter, the Bareboat Charterer often has broad insurance responsibility.

The usual approach may be summarized as:

  1. Voyage Charter: Extra insurance caused by voyage orders may be for Charterers’ account if agreed.
  2. Time Charter: War risk premiums caused by Charterers’ trading orders may be for Charterers’ account, while over-age premiums may remain for Shipowners unless otherwise agreed.
  3. Bareboat Charter: The Bareboat Charterer commonly arranges and pays for insurance during the bareboat period.
The Charter Party should state responsibility clearly. Any extra premium affecting the voyage should be included in the TCE calculation.

TCE (Time Charter Equivalent) Example 1

TCE (Time Charter Equivalent) Example 1 shows a Supramax dry bulk voyage.

Assume a Supramax ship carries 52,000 metric tons of bulk cargo at USD 24 per metric ton.

52,000 × USD 24 = USD 1,248,000 Gross Freight

Voyage expenses are estimated as:

  • Bunker costs: USD 265,000
  • Port charges: USD 72,000
  • Canal fees: USD 35,000
  • Agency fees: USD 18,000
  • Total voyage expenses: USD 390,000
Net voyage revenue is:

USD 1,248,000 - USD 390,000 = USD 858,000

Total voyage days are:

  • 5 days loading
  • 21 days sailing
  • 5 days discharging
  • Total voyage days: 31 days
TCE is:

USD 858,000 ÷ 31 days = USD 27,677/day

TCE (Time Charter Equivalent) Example 2

TCE (Time Charter Equivalent) Example 2 shows a Panamax grain voyage.

Assume a Panamax ship carries 76,000 metric tons of grain at USD 19 per metric ton.

76,000 × USD 19 = USD 1,444,000 Gross Freight

Voyage expenses are:

  • Bunker costs: USD 360,000
  • Port charges: USD 95,000
  • Canal fees: USD 55,000
  • Agency fees: USD 22,000
  • Total voyage expenses: USD 532,000
Net voyage revenue is:

USD 1,444,000 - USD 532,000 = USD 912,000

Total voyage days are 38 days. TCE is:

USD 912,000 ÷ 38 days = USD 24,000/day

TCE (Time Charter Equivalent) Example 3

TCE (Time Charter Equivalent) Example 3 shows an Aframax tanker voyage.

Assume an Aframax tanker carries 85,000 metric tons of crude oil at USD 13 per metric ton.

85,000 × USD 13 = USD 1,105,000 Gross Revenue

Voyage expenses are:

  • Bunker costs: USD 310,000
  • Port charges: USD 82,000
  • Canal fees: USD 40,000
  • Agency fees: USD 16,000
  • Cargo heating allowance: USD 24,000
  • Total voyage expenses: USD 472,000
Net voyage revenue is:

USD 1,105,000 - USD 472,000 = USD 633,000

Total voyage days are 27 days. TCE is:

USD 633,000 ÷ 27 days = USD 23,444/day

TCE (Time Charter Equivalent) Example 4

TCE (Time Charter Equivalent) Example 4 shows a Capesize iron ore voyage.

Assume a Capesize ship carries 170,000 metric tons of iron ore at USD 9 per metric ton.

170,000 × USD 9 = USD 1,530,000 Gross Freight

Voyage expenses are:

  • Bunker costs: USD 510,000
  • Port charges: USD 115,000
  • Canal or routing fees: USD 60,000
  • Agency fees: USD 24,000
  • Total voyage expenses: USD 709,000
Net voyage revenue is:

USD 1,530,000 - USD 709,000 = USD 821,000

Total voyage days are 48 days. TCE is:

USD 821,000 ÷ 48 days = USD 17,104/day

TCE (Time Charter Equivalent) Example 5

TCE (Time Charter Equivalent) Example 5 shows a Handysize coal voyage.

Assume a Handysize ship carries 31,000 metric tons of coal at USD 16 per metric ton.

31,000 × USD 16 = USD 496,000 Gross Freight

Voyage expenses are:

  • Bunker costs: USD 118,000
  • Port charges: USD 46,000
  • Canal fees: USD 18,000
  • Agency fees: USD 9,000
  • Total voyage expenses: USD 191,000
Net voyage revenue is:

USD 496,000 - USD 191,000 = USD 305,000

Total voyage days are 21 days. TCE is:

USD 305,000 ÷ 21 days = USD 14,524/day

Gross Daily Rate Example 1 in Ship Chartering

Gross Daily Rate Example 1 in Ship Chartering compares a voyage charter with a time charter.

Assume a Panamax ship carries 62,000 metric tons of grain at USD 18 per metric ton.

62,000 × USD 18 = USD 1,116,000 Gross Freight

Total voyage days are 31 days. Gross Daily Rate is:

USD 1,116,000 ÷ 31 days = USD 36,000/day

If a time charter option pays USD 25,000 per day, the voyage charter looks better on gross daily basis. However, voyage expenses must be deducted before the real comparison is made.

Gross Daily Rate Example 2 in Ship Chartering

Gross Daily Rate Example 2 in Ship Chartering uses a Supramax coal voyage.

Assume a Supramax ship carries 51,000 metric tons of coal at USD 21 per metric ton.

51,000 × USD 21 = USD 1,071,000 Gross Freight

Total voyage days are 24 days. Gross Daily Rate is:

USD 1,071,000 ÷ 24 days = USD 44,625/day

If voyage expenses total USD 410,000, TCE becomes:

(USD 1,071,000 - USD 410,000) ÷ 24 days = USD 27,542/day

This shows why Gross Daily Rate is only a first impression, while TCE is the better measure.

Gross Daily Rate Example 3 in Ship Chartering

Gross Daily Rate Example 3 in Ship Chartering uses an Aframax tanker voyage.

Assume an Aframax tanker carries 92,000 metric tons of crude oil at USD 12 per metric ton.

92,000 × USD 12 = USD 1,104,000 Gross Freight

Total voyage days are 29 days. Gross Daily Rate is:

USD 1,104,000 ÷ 29 days = USD 38,069/day

If bunkers, port costs, heating, insurance extras, and agency fees are high, the TCE may be substantially lower than this gross daily figure.

TCE Sensitivity Analysis

TCE sensitivity analysis tests how the voyage result changes when assumptions change. This is important because voyage estimates are exposed to uncertainty. Bunker prices may rise, port delays may increase, weather may slow the ship, cargo operations may take longer, demurrage may not be recovered, or despatch may become payable.

Useful sensitivity tests include:

  1. TCE if bunker price increases by USD 50 per metric ton.
  2. TCE if port time increases by two days.
  3. TCE if sea speed is reduced by one knot.
  4. TCE if demurrage is not recovered.
  5. TCE if despatch is payable.
  6. TCE if canal dues are higher than expected.
  7. TCE if cargo quantity is reduced.
  8. TCE if discharge port congestion increases.
  9. TCE if WRAP is payable.
  10. TCE if additional hold cleaning is required.
A voyage that produces acceptable TCE only under perfect assumptions may be too risky. Sensitivity analysis shows the strength of the voyage result.

Common Mistakes in TCE Calculation

  1. Using gross freight instead of net freight.
  2. Forgetting brokerage commission.
  3. Forgetting address commission.
  4. Underestimating bunker consumption.
  5. Using outdated bunker prices.
  6. Ignoring port consumption.
  7. Using unrealistic speed.
  8. Ignoring ballast days.
  9. Ignoring waiting time.
  10. Ignoring canal dues.
  11. Ignoring port disbursements.
  12. Ignoring war risk premiums.
  13. Ignoring over age premium.
  14. Ignoring cargo heating in tanker voyages.
  15. Assuming demurrage without supporting evidence.
  16. Forgetting despatch exposure.
  17. Confusing operating costs with voyage expenses.
  18. Comparing TCE figures calculated on different bases.

Practical TCE Checklist for Shipowners

  1. Confirm cargo quantity and freight rate.
  2. Calculate gross freight.
  3. Deduct brokerage and address commission.
  4. Calculate ballast distance.
  5. Calculate laden distance.
  6. Use realistic speed and consumption.
  7. Calculate bunker consumption at sea.
  8. Calculate bunker consumption at port.
  9. Apply current bunker prices.
  10. Estimate loading and discharging time.
  11. Include waiting and congestion.
  12. Include canal time and canal dues.
  13. Obtain port cost estimates from agents.
  14. Include extra insurance premiums.
  15. Include tanker heating or pumping costs where relevant.
  16. Calculate total voyage expenses.
  17. Calculate total voyage days.
  18. Calculate TCE.
  19. Compare TCE with time charter market levels.
  20. Deduct daily operating costs to calculate net daily income.
  21. Run sensitivity analysis before fixing.

What is EWI in Ship Chartering?

What is EWI in Ship Chartering? EWI may be used as a market-related earning indicator or index depending on context. It is not the same as TCE for a specific ship and voyage. TCE is calculated from the actual or estimated economics of one employment. A market index reflects broader market conditions for a ship type, route, or segment.

Market indices are useful for understanding general market direction, but they do not replace vessel-specific voyage estimating. A ship with different consumption, age, port exposure, cargo requirements, or ballast position may earn more or less than an index suggests.

TCE and Market Indices

Dry bulk and tanker markets often use indices to measure freight market strength. These indices help Shipowners, Charterers, brokers, and analysts understand market trends. However, an index is an average or route-based benchmark. It does not show the actual result of one ship unless the ship’s specific costs and timing are considered.

TCE is therefore the practical commercial calculation. Market indices show market context. TCE shows ship-specific earning performance.

Conclusion: TCE (Time Charter Equivalent)

TCE (Time Charter Equivalent) is a core measure in ship chartering because it converts voyage charter economics into a daily earning figure. It helps Shipowners compare voyage charters with time charters, evaluate alternative cargoes, test route profitability, assess bunker exposure, and make better fleet deployment decisions.

The TCE calculation is straightforward in principle but demanding in practice. Voyage revenue must be calculated correctly. Brokerage and address commission must be included. Voyage expenses such as bunkers, port charges, canal dues, agency fees, extra insurance, cargo heating, and other costs must be deducted. Total voyage days must include ballast passage, laden passage, port time, waiting, bunkering, canal transit, and realistic operational allowances.

A strong TCE does not automatically mean final profit. Daily operating costs must also be deducted to calculate Net Daily Income. Financing costs, depreciation, corporate overhead, and strategic positioning may also influence the final commercial decision.

In dry bulk, tanker, and other shipping markets, TCE remains one of the most practical tools for measuring voyage performance. A carefully prepared TCE calculation helps Shipowners avoid misleading freight figures, compare employment opportunities, manage commercial risk, and deploy ships more profitably.