Voyage Estimation is the calculation of the profit or loss that a ship will make from a proposed voyage charter. Voyage Estimation is simply profit and loss calculation for the particular voyage in question that is arrived at by deducting all related expenses from total income.
In voyage charter, there are two (2) types of costs:
- Operating Costs: crew costs, repairs and maintenance, insurance, stores, lubes etc.
- Voyage Costs: bunker (fuel), port dues, dock dues, canal tolls etc.
In voyage charter, operating and voyage costs are paid for by the shipowner. Therefore, Voyage Estimation must take into account freight income and subtract all voyage-related expenses, including address commission and brokerage.
In voyage chartering negotiations, Voyage Estimation is an indispensable part that assists shipowners to 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.
On the other hand, Voyage Estimation is used by charterers in order to evaluate the appropriate ship for an attempt to minimize the cost of the transportation services.
Alternative voyages may be offered to shipowner and each alternative needs to be estimated prior to negotiating and completing any chartering deal. Voyage Estimation must be performed as accurately as possible. Even tough, Voyage Estimation is an estimate, it gives a very good indication for the potential profitability of a particular voyage. Furthermore, Voyage Estimation may provide comparisons with a Time Charter Equivalent (TCE) charter. Time Charter Equivalent (TCE) estimate is a figure that denotes the daily hire that the ship will obtain if chartered on the particular voyage trip.
Process of Voyage Estimation: Voyage estimating is a process that takes into account the following factors:
- Cargo and Stowage Factor
- Ship Characteristics
- Time at Sea
- Time at Port (Loading and Discharging Operations)
- Time at Bunkering Port
- Bunker (Fuel) Costs
- Port Costs
- Canal Costs
- Freight Income
- Operating Expenses
- Commissions (Address Commissions and Brokerages)
- TCE (Time Charter Equivalent)