Voyage Estimation

A voyage estimate aims at calculating the profit or loss that a vessel will make from a proposed voyage. In other words, voyage estimates are simply profit and loss accounts for the particular voyage in question that are arrived at by calculating the income and then subtracting all related expenses. Unlike time charters, in voyage charters all the vessel-related expenses that include operating costs (crew costs, repairs and maintenance, insurance, stores and lubes, etc.) and voyage (variable) costs (fuel, diesel oil, port dues and costs, canal tolls, etc.) are paid for by the shipowner. Hence, a voyage estimate must take into account freight income (bill of lading amount loaded on the ship in tons by freight rate in dollars) and subtract all voyage-related expenses, including address commission and brokerage. A voyage estimate is an indispensable part of chartering negotiations as it helps owners assess the financial feasibility of a particular trip vis-a-vis alternative voyages that may be available and in relation to the amount of profit required as well as prevailing competing freight rates. Voyage estimates, however, are also performed by charterers, as they can assist them in evaluating the appropriate vessel and the economic implications for their required voyage in their attempt to minimize the cost of the transportation service and include more favorable terms for them in the charter party. A shipowner may be presented with alternative voyages, and each alternative needs to be estimated prior to negotiating and completing any chartering deal. Voyage estimation must be performed as accurately as possible. Although it is an estimate, it gives a very good indication for the potential profitability of a particular voyage and can also provide comparisons with a time charter equivalent charter. A time charter equivalent estimate is a figure that denotes the daily hire that the vessel will obtain if chartered on the particular voyage trip.

The Process of Voyage Estimation:
Voyage estimating is a process that takes into account the following factors:

  1. Amount of cargo that can be lifted
  2. Ship characteristics
  3. Time at sea
  4. Time at port for loading and discharging operations
  5. Time at bunkering port if any
  6. Bunker costs
  7. Port charges and canal transit fees
  8. Freight income calculations
  9. Operating expenses, commissions, and TCE (Time Charter Equivalent)