Estimating

Time charter equivalent

Published 20 August 2026 · updated 22 September 2026

A charterer offers freight per tonne. An owner is being quoted hire per day somewhere else. Those numbers cannot be compared until one is converted, and the conversion runs one way: take the freight, subtract everything the owner will spend on the voyage, and divide by the days it takes. That result is the time charter equivalent, and producing it is the only reason a voyage estimate exists.

Why the answer has to be per day

Two cargoes on a broker’s screen might be grain at one rate over a short haul with cheap ports, and steels at a much better rate over a long haul with an expensive discharge port and a canal in the middle. Comparing the two freight rates tells you nothing. Comparing the gross revenue tells you nothing either, because the bigger number may take three weeks longer to earn and burn twice the fuel doing it.

A ship’s scarce resource is her time. Every voyage consumes days that cannot be spent on another cargo, so the honest unit is what she earns per day after the voyage has paid for itself. It is also the unit the time charter market quotes in: once a voyage is expressed as a daily figure, an owner can hold it against the hire on offer for a trip or a period and choose.

The arithmetic

Written out, with a Supramax lifting grain. The figures are round and invented to make the arithmetic legible, not a market quote.

Supramax, 55,000 mt grain, one voyage. Illustrative figures only.

  Gross freight    55,000 mt x 22.00 /mt                1,210,000
  Less commission  5.00% (address plus brokerage)         -60,500
                                                       ----------
  Net freight                                           1,149,500

  Bunkers   ballast   6.0 days x 20 mt/day = 120 mt
            laden    14.0 days x 20 mt/day = 280 mt
            in port  10.0 days x  3 mt/day =  30 mt
                     430 mt x 500.00 /mt                -215,000
  Port charges, load port                                -45,000
  Port charges, discharge port                           -60,000
  Canal dues                                             -95,000
                                                       ----------
  Voyage result                                           734,500

  Voyage days   ballast   6.0
                laden    14.0
                loading   4.0
                discharge 5.0
                waiting   1.0
                                                            30.0

  TCE = 734,500 / 30.0 = 24,483 per day

There is a free voyage estimate and TCE calculator on this site that runs exactly this sum, including the waiting-day row, and works it backwards to the freight rate a target TCE would need.

That is the whole model. Everything else in voyage estimating is an argument about what belongs on one of those lines and what number to put beside it.

What each line is really made of

• Quantity. Freight is earned on cargo loaded, not on deadweight, so the intake has to come off the particulars and the port’s draught restriction, not off the size class. Whether the charterer’s option on quantity sits at five or ten per cent, and who declares it, moves the top line before anything else does.
• Commissions. Address commission to the charterer and brokerage to the brokers come off gross freight, and they come off demurrage too unless the fixture says otherwise. Estimating on gross freight overstates the answer by the whole percentage.
• Bunkers. Consumption at sea times sea days, plus a smaller port consumption for generators and cargo gear, times a price per tonne. Grades matter: a voyage that crosses an emission control area burns compliant fuel at a different price for that stretch, and an estimate that uses one blended price for the whole voyage has buried the difference.
• Port charges. Tonnage dues, pilotage, towage, berth hire, agency, light dues. They vary by port far more than people expect, and are the line most often carried forward from a stale disbursement account.
• Canal dues. Nil on most routings and very large on the ones that have them. The line belongs in the template even at zero, because the routing that adds it is the routing where somebody forgets.
• Days. Steaming days come from distance divided by speed. Port days are an assumption about berth availability and cargo rates. Waiting is an assumption about congestion. Only the first of those three is arithmetic.

Where the inputs are soft

An estimate looks like a calculation and behaves like a set of opinions. It is worth being explicit about which is which.

Speed and consumption are a warranty, not a measurement. The figures in a description are performance under stated conditions: a defined sea state, a defined wind force, no adverse current, and usually a good weather definition that decides how the claim is tested afterwards. A ship on a laden passage through a monsoon does not make her warranted speed and does not burn her warranted tonnes. Estimating on the description is normal and correct; treating the description as a forecast of this particular passage is not.

Port time is the estimate inside the estimate. Nobody warrants it. Loading rate, berth congestion, holds requiring cleaning between grades, a surveyor who will not pass the ship on the first attempt, weather working days that stop counting when it rains. Ten port days in the example above is a judgement about somebody else’s terminal.

Bunker price is a market number that will have moved. Fuel is usually the largest single voyage cost, and an estimate written on last month’s price is not conservative, it is simply wrong in an unknown direction.

The discipline that helps is marking which numbers are hard, which are warranted and which are guessed. An estimate whose inputs all look equally solid is the one that gets defended after the ship has lost money.

The ballast leg, and why the next cargo changes the answer

The six ballast days in the example earn nothing and cost fuel, and the voyage pays for them anyway. That single line is why the best cargo on the board is often not the one with the best freight rate. A high rate two thousand miles away can produce a worse daily figure than an ordinary rate on a cargo the ship is nearly alongside, and the only way to see it is to run both estimates with their own ballast legs attached.

It also matters where she ends up. A voyage that discharges into an area with cargo moving leaves the ship employable the next day. The same voyage into a dead area buys a long ballast out, and that ballast is a cost of this fixture even though it will appear on the next one. Desks handle this in different ways: some estimate the round trip back to a natural load area, some estimate one leg and adjust the answer by judgement, some ask for a ballast bonus in the negotiation to cover the approach. All three are defensible. What is not defensible is comparing a single laden leg against a round voyage and calling them the same number.

Demurrage is an expected value, not revenue

Demurrage is real money and it is not certain money. A ship that overruns her laytime earns it, a ship that beats laytime may owe despatch, and either way the sum arrives after the event and often after an argument about the statement of facts. Putting a full demurrage claim into an estimate as though it were freight makes a marginal voyage look attractive.

The workable treatment is to estimate the port days honestly, including the waiting a broker believes is coming, and then take a view. If the port history says a ship of this size waits several days at that berth, the days belong in the denominator and the demurrage those days would generate belongs in the numerator only at whatever probability the estimator actually believes. Some desks run two cases, one clean and one congested, and look at the spread rather than the midpoint. Both approaches are better than the common alternative, which is to leave congestion out of the days and then add demurrage to the revenue as a comfort.

Where the answer actually moves

Sensitivity is worth running because it changes what a broker argues about in the negotiation. Taking the example above and moving one input at a time:

Read the two cost rows against the freight row. On this voyage a hundred dollars a tonne on the bunker price costs about the same as eighty-two cents a tonne on the freight rate, and two days of unexpected waiting costs slightly more than that. A broker who negotiates hard on the rate and accepts the charterer’s optimistic loading rate without comment has argued over the smaller number.

The same arithmetic, read backwards

Everything above assumes you are the owner, deciding whether a rate is worth accepting. A desk that has taken the ship on time charter and is reletting her against a cargo asks the reverse question. Hire is going out at a known figure every day, so the unknown is not the daily return but the freight: what must I charge a tonne to cover the hire and the voyage?

It is the same calculation with one line added and the solve turned around. Hire becomes a voyage cost like any other, charged on every day of the voyage including the days she waits, and the freight rate is whatever makes the voyage result zero. Working estimators built this way are common, and on a short voyage the hire line dominates everything else on the sheet: thirty-seven days at eight thousand a day is three hundred thousand dollars before a tonne of fuel is burned.

Two things follow that catch people out. The daily figure stops meaning what it meant: with hire on the sheet it is the margin over hire, not what the ship earns. And the waiting days matter more, not less, because every one of them is charged hire whether she is working or not.

Port fuel is worth stating explicitly rather than totalling. Whether the load port's consumption is your cost or the owner's is a commercial question, not an arithmetic one, and two brokers can hold opposite views while both find the same total plausible. An estimate that shows fuel port by port makes that disagreement visible; one that sums them first hides it, sometimes for years.

What the figure does not include

TCE is a gross earning, and it compares to a hire rate for exactly that reason: under a time charter the charterer buys the bunkers and pays the ports, so hire and TCE sit on the same side of the voyage costs. Neither one is profit. The ship’s daily running cost, crew, insurance, stores, maintenance, class and survey, sits below both, and the capital cost sits below that. A daily figure that beats one owner’s breakeven can be a loss for another owner with the same ship on a different balance sheet.

The last honest point is about what an estimate is for. It will not be right. The ports will work at a different rate, the weather will not match the description and the fuel will not cost what the sheet said. It is a decision tool: a way of putting two cargoes in the same units so the better one can be chosen with the reasons written down. Judge an estimate by whether its assumptions were stated and its sensitivity was run, not by whether the number came true.

The calculator linked above works this through on figures you type in. The estimator inside the product works it through on a real sea distance for a named hull, prices the two bunker grades separately, and will rank one cargo across several ships at once.

References

• Baltic Exchange, Guide to Market Benchmarks.
• Steamship Mutual, Speed and performance, FAQs. steamshipmutual.com
• International Maritime Organization, IMO 2020, cutting sulphur oxide emissions. imo.org

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