Ship Voyage Estimation is forecasting of costs and revenues. Unavoidably, Ship Voyage Estimation includes comparing one voyage with an alternative voyage to see which produces the most immeasurable yield. Ship Management or Shiprbokers are closely involved in Ship Voyage Estimation calculations. Ship Manager must be adequately aware of the process of voyage estimating. It is important to understand how numerous pieces of data, supplied by the ship manager, apply to the process of estimating the profitability of a proposed voyage.
Voyage Estimation incorporates both Voyage and Time Charter Trips (TCT). Time Charter Trips (TCT) are infrequently as straightforward as they seem. Ships do not run like clockwork, therefore, in Voyage Estimation, it is impracticable to calculate to perfection. Voyage Estimation aim should be less than absolute accuracy and it is vital to seek to achieve this and to test the accuracy of the Voyage Estimates against the Final Voyage Results. For Voyage Estimation, it is also necessary to know maritime geography, distances of main ports, and load line zones. There are many digital distance tables, however, to avoid ridiculous mistakes shipbrokers should have a reasonably accurate idea of the major world distances. A helpful method is to divide the world into regions, generally this principally falls into oceans, and then learn several strategic distances across each region. Preferably, instead of actual distance, a shipbroker can think in terms of days steamed. For example, a speed of 14 knots works out at approximately 3 days per 1,000 nautical miles. Therefore, it is easy to remember that a transatlantic voyage from US Gulf to the Netherlands is performed in 15 days. Under this easy method, voyages can be calculated and remembered. After calculating the length of the sea voyage, a frame can be produced for Voyage Estimation.
Ship Voyage Length
Ship voyage should always be from the time and the place where the ship completes discharge of the previous cargo. Therefore, the first part of the voyage is the Ballast Leg unless the shipowner is fortunate enough to secure a cargo out of the port in which the ship has just discharged. Some shipbrokers and ship managers commence the voyage at the loading port and follow the laden passage with a theoretical ballast back to the loading port again. However, while this view might be realistic for tankers, dry cargo tramp ships rarely proceed on the same voyage twice so this is rarely a practical solution. With distances to hand, it is not challenging to estimate the length of the sea passage including the Ballast Leg. Estimating the time spent in port can be a more prominent problem. Estimating the time spent in port for tankers is moderately simple as most tanker charter-parties incorporate a standard 72 hours all purposes laytime. However, the time spent in port for dry cargo bulk carriers differs enormously. The difficulty is that a shipbroker or ship manager cannot usually calculate the port time until they know the cargo quantity. A shipbroker or ship manager cannot calculate the cargo lift until they know the bunkers which they cannot work out until they know the port time. Dry cargo ships consume little bunkers in port which can be safely neglected for initial cargo estimates. A shipbroker or ship manager should be very careful over the voyage route selected. Sometimes there are alternative routes and only a negligible difference will tilt the pendulum in favor of one or the other. A shipbroker or ship manager should consider bad weather, high canal tolls on one route, and cheaper bunkers on another. In Voyage Estimation, ship speed is another crucial factor. In some circumstances, it might be more beneficial to steam slowly and economize on bunkers.
A shipbroker or ship manager needs to know the ship’s total deadweight (DWT). From the ship’s total deadweight (DWT), a shipbroker or ship manager must first deduct the constants (stores, water, lubricants, spares, the weight of the crew). Total constants weight is rarely critical. Total constants weight is in the region of 400 to 500 metric tons for most deep-sea ships of 30,000 DWT and above. Moreover, a shipbroker or ship manager needs to deduct the bunkers on board to calculate the true cargo capacity DWCC (Deadweight Cargo Capacity). A proper figure for DWCC (Deadweight Cargo Capacity) is calculated, however, this is not the end of the Voyage Estimation. The ship may be able to lift a particular tonnage of cargo but also the ship must have enough space to carry that cargo. Therefore, a shipbroker or ship manager must also calculate the Stowage Factor (SF). Theoretically, by dividing the grain or bale cubic of the ship by the Stowage Factor (SF), a shipbroker or ship manager calculates the ship’s volume capacity. However, if there are various types of grades of cargo to be separated, it may be impossible even to fill the ship. Furthermore, ship trim and stability must also be considered. A shipbroker or ship manager must also consider the load-line zones and calculate the cargo accordingly. All load-line zones transited between loading and discharging ports must be considered. For instance, a ship cannot enter a winter zone when loaded to summer marks.
When the cargo quantity, loading rates, and discharging rates per day are known, then the port time can be estimated with some accuracy. However, there are some pitfalls because it is rare for weekends and holidays to count in dry cargo charter-parties and these, united with notice time and weather delays, extend the port time before demurrage is likely to commence. Example:
A bulk carrier is to load 49,000 metric tonnes of cargo and the charter loading rate is 3,500 tonnes (PWWD) per weather working day of 24 consecutive hours, Sundays and Holidays Excepted (SHEX). If a shipbroker or ship manager divides 49,000 by 3,500, the loading time allowed to the charterers is 14 days. However, 14 days excludes weekends and if you consider the working week to be 5 days, the laytime allowed approaches 3 weeks. If allowances are also made for notice time and some weather delays, it will become realistic to allow 20 days in port for loading operation. If loading operation is to take place throughout extensive Public Holidays (Christmas, New Year, Ramadam), even more port time should be allowed. If the time allowed includes Sundays and Holidays (SHINC) less allowance will be needed, in this example, approximately 15 days. Even with Sundays and Holidays (SHINC), there are unavoidable delays such as shifting, notice time, etc.
Generally, the full-time allowance should be put in the Voyage Estimation and demurrage/despatch should be ignored. Furthermore, different criteria have to be used for Despatch Charters for particular trades such as sugar. It is very well-known that ships habitually load and discharge completely within their laytime and, however, shippers and receivers expect to earn considerable despatch money. Therefore, when comparing two voyages, Despatch Charters will present an abnormal disparity. Unfortunately, there is no shortcut to knowledge in such cases, and a shipbroker or ship manager must be aware of the trades where fast turn-rounds are to be found. In Despatch Charters, a shipbroker or ship manager should estimate a lesser port time than allowed. Therefore, a decent addition to the expenses must be made to cover the inevitable despatch money.
In Voyage Estimation, if more than one port of loading and/or discharging is used, extra hours must be allocated for the time required in the actual process of entering and leaving.
Other Delays in Voyage Estimation
Bunker: in some ports, bunkering might be lengthy. In Voyage Estimation, a shipbroker or ship manager should allocate one (1) day for each bunkering call.
Canal Transit: canal transits unavoidably lengthens the voyage, therefore, a shipbroker or ship manager should allocate two (2) days each for passage through Suez Canal and Panama Canal in Voyage Estimation. Time might be lost for waiting and for the canal transit.
Bad Weather: usually a shipbroker or ship manager does not allow additional steaming time for possible bad weather unless it is certain from the nature of the voyage that delay will be experienced.
Starting the Voyage Estimation
When the main components are available, a shipbroker or ship manager can begin the Voyage Estimation calculations. Broadly, the Voyage Estimation calculation consists of income minus expenditure. Voyage Estimation form and procedure used is a matter of personal opinion however these can all be classified under one method. Most shipping companies have their Voyage Estimation layout depending on the type of ship they manage.
It is extremely easy to reduce the Voyage Estimation on a piece of paper, indeed. However, before that level is reached, significant experience has to be gained at a more leisurely pace and this is where a set format is so essential. In Voyage Estimation, if all the different items of income and expenditure are set out, it is hard to forget the odd item, which can make the difference between profit and loss. If a shipbroker or ship manager is likely to be involved in regular Voyage Estimation, he drafts out a suitable form and uses the Voyage Estimation draft constantly. Today, there are computer programs for Voyage Estimation such as Netpas Estimator, however mastering the manual Voyage Estimation method is essential to avoid silly errors with the computer.
Voyage Estimation can be made appropriately on plain paper; the essential point is to learn the method. Generally, a shipbroker or ship manager follows the here below Voyage Estimation method:
1- A shipbroker or ship manager preplans the voyage, duration, and bunker consumption. Preplanning enables a shipbroker or ship manager to observe at a glance just what is intended. This is called an itinerary.
2- A shipbroker or ship manager calculates what cargo can be loaded. This part needs to be completed in conjunction with the itinerary. For instance, when port time is estimated against a daily loading or discharging rate.
3- A shipbroker or ship manager records all expenses such as bunkers, port disbursements, canal costs, stevedoring, despatch, extra insurance premium are obvious examples.
4- A shipbroker or ship manager assess Income, Profit, and Loss.
In the Voyage Estimation process here above, in part three (3), bunker consumption is presumably the most difficult to calculate. Ship Bunkering is an art and no two voyages are likely to be the same, due to seasonal changes, price fluctuation, and the need to balance bunker prices against freight income.
When transiting a canal or a narrow waterway a ship may run on MGO (Marine Gas Oil) in the main engine although this is becoming less common with modern engine designs. MGO (Marine Gas Oil) is of a higher quality and more expensive than IFO (Intermediate Fuel Oil). MGO (Marine Gas Oil) usage result in a more instant engine response to navigation movements. During MGO (Marine Gas Oil) usage, ordinary daily speeds and consumptions do not apply. The ship steams slowly and consumes bunkers more economically. Therefore, it might be necessary to estimate normal speed and consumption to and from either end of the canal, adjusting time and consumption appropriately.
Port costs cannot easily be estimated without experience and most shipping companies keep records of previous port calls. Organizations such as BIMCO (The Baltic and International Maritime Organization) and INTERTANKO (International Association of Independent Tanker Owners) contribute important information on many ports but presumably the most accurate way is to call the port agent in question with necessary details of the ship and ask the port agent to provide a Proforma Disbursement Account (PDA). Normally, canal dues are based on the ship’s Canal Tonnage as the canal authorities tend to add in more cubic earning spaces when they grant the ship a canal certificate. A shipbroker or ship manager should keep in mind that mere calculation of the canal dues payable will not be sufficient, as extra charges yield for such items as agency and towage.
In the Voyage Estimation process, there is the possible expense of despatch payable if the trade is such that the ship is turned around much faster than the laytime allows. If a shipbroker or ship manager is in any doubt, it is more beneficial to allow full time in the Voyage Estimation to calculate the most pessimistic result and be on the safe side.
In the Voyage Estimation process, a shipbroker or ship manager should also include cargo-handling expenses and extra insurance premiums such as breaching INL (Institute Navigating Limits) or extra WRI (War Risk Insurance) for trading to regions beset by the risk of warlike action.
A shipbroker or ship manager should calculate the cargo intake and multiply this quantity by the rate of freight offered by charterers. The sum is known as the Gross Freight, from which have to be deducted any Shipbrokers’ Commissions due. Besides, it is common to deduct any Freight Tax at this stage. Freight Tax and ILW (In Lieu of Weighing) are being almost invariably a percentage of the Freight. The result after deducting these items from Gross Freight is called Net Freight. The Voyage Estimation result can be calculated by subtracting expenses from income and dividing the result by the number of days taken for the voyage. The result is the Gross Daily Profit. Gross Daily Profit gives us an easily comparable amount for any variety of different voyages. To calculate the Net Daily Profit, it is essential to include the Daily Running Costs. A shipbroker or ship manager is not concerned as to how that daily figure is made up but will simply want a lumpsum per day. It is the choice of the shipowner whether or not the capital costs are included in this figure however, whether capital costs are included or not, it is important to be consistent.
Tankers Voyage Estimation
There are a few dissimilarities between Voyage Estimation for dry cargo ships and tankers. Tanker charters based upon Worldscale, the laytime calculation is easier as the scale allows for 72 running hours total for loading and discharging and 96 hours total in port. An expense in tankers that do not occur in dry cargo ships is the consumption of bunkers for ancillary purposes such as cargo heating, pumping cargo, and tank cleaning. It is exceptionally challenging to estimate bunker consumption for heating cargo depending, as it does, on the temperature at which the cargo is loaded, whether in wing or center tanks, and on the ambient temperature of the sea and air during the voyage. Only the technical department can give an accurate estimation for this purpose as, without their available statistics, it can only be pure guesswork. Pumping and tank cleaning is simpler, however the technical department should be asked for an average bunker consumption based on experience.
Time Charter Voyage Estimation
When charterers take ships on time charter for trips, it is apparent that charterers want to estimate the daily profit on Time Charter Trip (TCT) in the same way as a Voyage Charter to compare the two results. Usually, Charterers prefer to take a ship on Time Charter (TC), either for a Trip or Period, as it gives charterers flexibility and also the possibility of diminishing their costs.
Time Charter (TC) Voyage Estimation would be an extremely simpler operation if the ship is taken on delivery at the previous discharge port and redelivered on completion of the voyage in question. Shipowner or ship operator simply deduct the Daily Running Cost from the Hire earned per day to achieve the daily profit. Commission should be deducted to achieve the daily net profit. If there is any difference between the charter price of bunkers paid by charterers on delivery and the actual price paid by shipowners, this must similarly be taken into account in the calculations. In Time Charter (TC) Voyage Estimation, problems arise when the ship is not taken on hire immediately after the previous employment and allowance has then to be made, not only for the time lost to shipowners whilst the ship is unemployed, but also for the bunkers consumed during that period. The calculation is not challenging if the income and expenditure and the number of days for the entire voyage are considered. By grossing up the daily hire receivable for every day the ship is likely to be on charter and deducting the Daily Running Cost, the shipowner obtain the profit for the entire operation. Daily Running Cost must be charged not only for the trip period but also for the ballast or waiting time before hire commences plus any bunkers, port charges, canal dues, etc. which are incurred by the shipowners before commencement of hire. To calculate the daily profit it is then necessary to divide by the number of days involved which will include those days ballasting or waiting before ship delivery, not just the days the ship is on hire. By this method, the shipowner obtains a comparable number to be set against other Voyage Estimations.
If several Voyage Estimations show similar results, it is up to the shipowner to decide whether he prefers a short or long voyage. The decision may depend on the shipowner’s expectations of the future increase or decrease of the shipping market and also depending on which region the shipowner prefers to complete the voyage for future trading. Sometimes, a shipowner may prefer a voyage with a lower return if it positions the ship ideally for a subsequent voyage or drydocking.
Voyage Estimation Example
In Voyage Estimation Example here below, a shipowner compares two (2) Voyage Estimations for his ship called MV HANDYBULK YAGMUR and selects the most profitable voyage. The question is presented here below provides all the data required to make the Voyage Estimation calculations. However, we simplified the problem that would normally arise in practice, where a shipbroker or ship manager would have to search all the data such as distances, and cheapest bunkers available.
A shipowner has the following vessel available in April at Pemba (Mozambique) following discharge of a cargo:
MV HANDYBULK YAGMUR
2020 Built Cyprus Flag Lloyd’s Register (LR)
15,240 SDWT (Summer Deadweight Tonnage)
8.86 meters Summer Saltwater Draft
5 Holds/5 Weatherdeck Hatches
Flush Tweendecks No 1,2,3 & 4
Bridge & Engines 4/5ths aft.
No. 5 a single hold, floored over
Derricks: 1 x 50, 4 x 10, 6 x 5 tonnes SWL
Bale: 19,520 cbm (689,350 cft)
Grain: 21,295 cbm (752,030 cft)
LOA: 141 m Beam: 20.45 m
Constant Weights: 150 tonnes
At Sea: 13 knots 18 mtons VLSFO + 1.5 mtons MGO
Port Idle: 1.5 mtons MGO per day
Port Working: 2.5 mtons MGO per day
VLSFO (Very Low Sulphur Fuel Oil)
MGO (Marine Gas Oil)
Bunkers Remaining on Board (ROB) 300 mtons VLSFO and 40 mtons MGO
MV HANDYBULK YAGMUR carries a Safety Surplus of 50 mtons VLSFO and 15 mtons MGO at all times. These quantities to be allowed for in any cargo quantity calculation (DWCC) but not to be costed in voyage results.
The Shipowner is analyzing offering for the following cargo:
A/C Minerals Ltd
Full Cargo Bulk Minerals
Loading Port: 1 sb 1 sp Mauritius
Discharging Port: 1 sb London
Loading Rate: 1,500 mtons PWWD SHEX
Discharging Rate: 750 mtons PWWD SHEX
Freight USD14.00 per mtons
Demurrage USD 2,150 /Half Despatch Laytime Saved Bends
5.5% Total Commission including (3.75% Address Commission)
A shipbroker or ship manager knows from previous experience:
1- Actual loading takes approximately 2 days, therefore allow for payment of despatch in the Voyage Estimation.
2- London is usually a congested port, therefore allow full laytime for discharge.
For Voyage Estimation:
a- Mauritius/London via Suez Canal
b- Mauritius/London via Cape of Good Hope (bunkering at Durban)
You will require the following information:
Pemba/Dar Es Salaam 475 nm (nautical miles)
Dar Es Salaam/Durban 1550 nm (nautical miles)
Dar Es Salaam/Suez 3650 nm (nautical miles)
Durban/London 6850 nm (nautical miles)
Suez/London 3200 nm (nautical miles)
2- Suez Canal Transit
Allow 2 days to Bunker and transit the Suez Canal consuming:
7 mtons VLSFO
7 mtons MGO.
3- Bunker Prices (USD/pmt) VLSFO MGO
Remaining on Board (ROB) 70 145
Suez 85 180
Durban 85 325
4- Port Disbursements (USD)
Dar Es Salaam 17,500
Suez Canal 35,000
Routing via the Suez Canal:
MV HANDYBULK YAGMUR is anticipated to steam around 312 miles per day at sea (13 x 24 hours) weather permitting. Usually, percentages of days at sea are best rounded up to whole days for simplicity of calculation and to allow for any unexpected delays. However, in short voyage estimations, this is not realistic. Therefore, for the 475 nm (nautical miles) between Pemba (Mozambique) and Dar Es Salaam 1.5 days should be allowed (475/312 = 1.522) although this percentage can be disposed of in the final voyage days analysis by allowing a compensating 2.5 days to load in Dar Es Salaam. Dar Es Salaam to the Suez Canal is 3,650 nm (nautical miles) which, divided by 312 miles per day equals around 12 days. 2 days is allowed for the Suez Canal transit and a canal bunker consumption of 7 mtons VLSFO and 7 mtons MGO, these items can be entered. The final leg of 3,200 nm (nautical miles) from the Suez Canal to London should take about 10 steaming days. We are going to calculate the port time in London however, since we are to work on a daily discharge rate in London and allow full laytime. So, we calculate the quantity of cargo on board. Furthermore, we should consider Load-Line Zones and any port limitations en route. Luckily, MV HANDYBULK YAGMUR will be in summer zones throughout the voyage so that this exercise does not have to assume the discussion of Load-Line Zones which will be dealt with in a later lesson. Fully laden MV HANDYBULK YAGMUR’s draft is still within the limits of the Suez Canal and there is sufficient depth of water at both loading and discharging ports. As a result, no restricting factors are altering the quantity of cargo to be loaded apart from those of the ship itself, its cubic capacity, and deadweight. Bulk minerals stow around 1.13 to 1.22 cubic meters per tonne (40 to 43 cubic feet). Allowing for an increase to this calculation for loss of trimming spaces, as a result of tween-deck overhangs, of an extra 10% as compared with a bulk carrier, the cubic space available should still be more than adequate. 21,295 cubic metres divided by 1.34 (1.22 + 10%) = 15,900 mtons approximately. Consequently, cargo intake can be based on the maximum DWT (Deadweight) available on sailing from Dar Es Salaam. In other words, up to summer marks less constant weights and bunkers. Constant weights are known. Bunkers need to be calculated. The longest voyage leg is that from Dar Es Salaam to the Suez Canal (12 days) and therefore we estimate that the MV HANDYBULK YAGMUR will have maximum bunkers on board at the commencement of the voyage. MV HANDYBULK YAGMUR has 300 mtons VLSFO and 40 mtons MGO ROB (remaining on Board) when sailing from Pemba (Mozambique). Therefore, from the MV HANDYBULK YAGMUR’s summer deadweight (SDWT) must be deducted an allowance for bunkers and constant weights calculated to remain on board when sailing from Pemba (Mozambique) to that stage of the voyage. Therefore:
Summer Deadweight (SDWT) 15,240 mtons
VLSFO 300 – 27= 273 mtons
MGO 40 – 6= 34 mtons (2 mtons MGO at Sea + 4 mtons MGO at Port)
Constant Weights= 150 mtons
Estimated Cargo Intake (DWCC)=14,783
300 mtons VLSFO and 40 mtons MGO includes the allowance for Safety Surplus. Bulk cargo is loaded mechanically at Dar Es Salaam by shore equipment. Hence, the MV HANDYBULK YAGMUR’s port consumption will not be increased to 2.5 mtons daily, which would be the case if MV HANDYBULK YAGMUR’s cranes were used. Discharging at London will also be by shore equipment, the HANDYBULK YAGMUR’s cranes will remain idle. To find the total discharge duration in London, Estimated Cargo Intake (DWCC)=14,783 is divided by daily discharge rate of 750 mtons equals to 20 days (19.7 days). However, discharge takes place on SHEX (Sundays Holidays Excluded) terms, therefore, build in time lost for weekends and holidays. A magic number that can be used in normal circumstances is the Factor of 1.4, which is 2 days lost for every 5 worked, a number that provides an estimate for SHEX (Sundays Holidays Excluded) terms. 20 days x 1.4 = 28 days on full laytime at London.
We have completed the Voyage Itinerary, Bunker Consumption, and Cargo Calculation of the Voyage Estimation. Now, we are going to calculate and combine all voyage expenses. We start calculating the Bunker Costs:
MV HANDYBULK YAGMUR has on board 300 mtons VLSFO and 40 mtons MGO at the commencement of the voyage, VLSFO cost at USD 70 and MGO cost USD 45 per tonne. The bunker balance required 130 mtons VLSFO and 48 mtons MGO must be taken at Suez and the cost should be added accordingly. The estimated disbursements (Port DAs) at Dar Es Salaam, Suez Canal, and London should be entered into Voyage Estimation. Now, we are going to estimate the Despatch Money. To calculate Despatch Money, we should take the estimated cargo of 14,783 mtons and divide it by the loading rate of 1,500 tonnes daily which is approximately 10 days. Loading will take approximately 2 days, and this can be deducted, to leave 8 days. If the MV HANDYBULK YAGMUR arrives and loads in midweek, then this will be the number on which to base despatch. If loading takes place over a weekend, time loading might not count (if SHEX EIU). Furthermore, we should consider if the despatch is to be calculated based on All-Time Saved or on Working Time Saved. In this Voyage Estimation example, we are going to use Working Time Saved, and allow 8 days for despatch at Dar Es Salaam. Despatch Money can be calculated as:
Despatch Money equals half of Demurrage Rate (USD 2,150)= USD 1,025 Despatch $1,025 x 8 days= USD 8,200
We are going to calculate the income and the estimated result. The freight rate is USD 21 per tonne. Therefore, 14,783 mtons x $21 per tonne less 5.5% total commission leaves us with a net freight of USD 293,369. From this must be deducted the total expenses of USD 156,886, leaving a Gross Voyage Surplus of USD 136,483.
Gross Voyage Surplus of USD 136,483 is then divided by the estimated number of days required to perform the voyage and we have a return of USD 2,437 gross daily which is before the deducting of daily ship running costs. If ship daily running costs were given, we deduct daily running costs from the gross daily income to arrive at the net daily income.
Routing via the Cape of Good Hope:
We have already calculated Pemba (Mozambique) to Dar Es Salaam and port time there. We have already calculated the distances from Dar Es Salaam to Durban and from Durban, via the Cape of Good Hope, to London, and can base time and consumption on this data. We are going to estimate the port time in London. Therefore, we are going to calculate cargo intake. The sea distance from Durban to London is approximately 22 days at 13 knots, weather permitting. Therefore, bunkers remaining on board (ROB) at the beginning of this leg will be greater than for any other leg and will consequently affect the maximum cargo quantity which can be allowed on board at that point. Thus, although MV HANDYBULK YAGMUR can load more cargo than would be required at Dar Es Salaam, we should remember always that the ship’s summer freeboard must not be submerged at any stage of the journey. If MV HANDYBULK YAGMUR is loaded to her full marks at Dar Es Salaam she would be overloaded when taking on necessary bunkers at Durban. Consequently, Durban sailing on summer marks is the restricting factor in this part of the estimate. Durban is located in a permanent summer load-line zone. Since the ship would then steam to London in either summer or tropical zones, there are no restricting factors of this nature. So, we can estimate the cargo intake:
Summer Deadweight: 15,240 mtons
Durban/London 396 mtons VLSFO
Safety Surplus 75 mtons VLSFO
Durban/London 33 mtons MGO
Safety Surplus 15 mtons MGO
Constant Weights= 150 mtons
Estimated Cargo Intake (DWCC)=14,571
Therefore, Estimated Cargo Intake (DWCC) via the Cape of Good Hope is going to be less than steaming via the Suez Canal, but the difference is marginal and will not affect the time needed to discharge on full laytime in London:
14,571 mtons / 750 mtons daily discharge rate x 1.4 = 27.20 days approximately 28 days
Routing via the Cape of Good Hope, port and transit expenses are similar to the routing via the Suez Canal, except that Suez Canal tolls are avoided however, instead, Durban port costs are included. Despatch Money is also similar, the difference in the cargo loaded making only minor effect.
The extra steaming time is reflected in extra bunker consumption. Once again the 300 mtons VLSFO and 40 mtons MGO remaining on board (ROB) at the commencement of the voyage must be costed at USD 70 and USD 145 per tonne respectively. However, we should add the balance of VLSFO and MGO required to steam London at the Durban prices of USD 85 and USD 325 respectively. Therefore, the estimated total expenses for routing via the Cape of Good Hope is USD 138,726. The smaller cargo intake indicates a marginally lower income of USD 289,162, however, lower-income is offset by these reduced cargo expenses to leave an increased Gross Voyage Surplus of USD 150,436. However, routing via the Cape of Good Hope takes longer than the route via the Suez Canal. Nonetheless, the net result is more profitably via the Cape of Good Hope by an increase of around USD 100 per day. Routing via the Cape of Good Hope generates a Gross Daily Income of $150,435/59 = $2,550 against routing via the Suez Canal generates a Gross Daily Income of $2437.
Voyage Estimation Time Charter Example
Let us assume that MV HANDYBULK YAGMUR is proposed a Time Charter business as follows:
Delivery APS Durban
Time Charter Trip (TCT) via safe ports South and East Africa
Redelivery DOP Izmir
Duration about 60 days, without guarantee
5% Total Commission
Charterer’s Hire Idea Maximum $3,000 per day
If the MV HANDYBULK YAGMUR performs this voyage, the shipowner would probably need to ballast after Izmir to the London-Continent to seek the next cargo. We are going to calculate if this time charter alternative is a better proposition than the voyage
Pemba (Mozambique)/Durban 1,350 nm (nautical miles)
Izmir/London 2,775 nm (nautical miles)
In Voyage Estimation Time Charter calculation, we should calculate the Gross Daily Return, so that fair comparison can be made with a voyage charter alternative, as well as other Time Charter Trips (TCT). In Voyage Estimation Time Charter calculation, brokerages and commissions must be deducted. Allowances have to be made where necessary for time and voyage expenses incurred from the start point of the exercise through to the start of the time charter, and again, from the completion of the time charter through to the end of the estimated voyage.
MV HANDYBULK YAGMUR will be open at Pemba (Mozambique) where she can proceed either to Dar Es Salaam to load minerals, or ballast to Durban to deliver on to Time Charter. The mineral cargo is going to be discharged in London and, for a tween-decker, the shipowner will certainly try to fix outwards from the Continent. However, the Mediterranean market is normally weaker for tween-deckers than is the Continent market. If we fix the Time Charter Trip (TCT) from Durban to Izmir, the shipowner will presumably ballast from Izmir to the Continent which must be considered. Therefore, we have another adjustment to perform following redelivery in Izmir. Pemba (Mozambique) to Durban and, at 13 knots, takes 4.5 days (1350/ 312). The distance from Izmir to London is 2775 nm (nautical miles) equating to a steaming distance of 9 days. Therefore, a total extra steaming of 13.5 days. We are going to calculate the approximate duration of the Time Charter Trip (TCT):
Income: USD 3,000 less 5% commission x 60 days= USD 171,000
VLSFO 13.5 days x 18 (tonnes daily) x USD 70 per tonne = USD 17,010
MGO 13.5 days x 1.5 (tonnes daily) x USD 145 per tonne = USD 2,937
Total Expenses: USD 19,947
Income USD 171,000 less Expenses USD 19,947 = USD 151,053
USD 151,053/ 73.5 total days overall (60 + 13.5) = USD 2,055 daily
The Time Charter Trip alternative is not a better proposition than the voyage.
What is Ship Voyage Estimation?
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)
Voyage estimating is an important skill for all persons engaged in the activity of dry-cargo chartering, whether from an owner’s or a charterer’s perspective, even for competitive brokers. It is common these days for charterers to undertake contracts, to relet tonnage and to take in vessels not owned by them, on a voyage or on time charter, whereas competitive brokers need the ability to evaluate potential business, to enable them to present outwardly unattractive cargoes and vessels in their true light. So it is not only those closely associated with the control of tonnage that needs the knowledge and ability this lesson sets out to help you acquire.
The first essential in voyage estimating is to examine the subject heading itself. Despite the reference to ‘voyage’, voyage estimating will inevitably include the realistic valuation of time charter trips, since these are rarely as financially straightforward as they first might appear. The work ‘estimate’ speaks for itself and, whilst we have no wish to promote inaccuracy, it is necessary to point out that ships do not run like clockwork and it is, therefore, impossible to calculate to perfection. That is not to suggest that one’s aim should be less than total accuracy, and it is essential to do best towards achieving a realistic appraisal of the potential worth of any proposed venture.
Shipbrokers should always compare a final ‘estimate’ with the eventual ‘results’ of a voyage or trip, so that any procedural shortcomings can be identified, and future errors avoided. For voyage estimating it is essential to have a knowledge of maritime geography, with particular regard to distances and permissible load-lines. There are several commercial distance tables available to assist with distances involved and one of these should always be used when embarking on a full-blown voyage estimate. To start such an exercise using a guess for the most fundamental piece of data would be very foolish; there is a great deal of sense in the dictum ‘don’t remember the fact ‘remember where to find it’.