Neptune Atlas

Tanker freight

Worldscale explained

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A tanker fixture is reported as "WS 92.5". There is no currency in that, no unit, and no quantity. It is a percentage of a separately published rate for that exact voyage, and the published rate changes every January. Everything confusing about tanker freight follows from those two facts.

What the schedule actually is

Worldscale is a nominal freight scale for tankers, produced by Worldscale Association (London) Ltd for most of the world and by Worldscale Association (NYC) Inc for the Americas. Each November the associations publish a new schedule of rates, effective from 1 January to 31 December of the following year. The schedule contains a rate in US dollars per tonne for thousands of individual voyages between named loading and discharging terminals. That rate is Worldscale 100 for that voyage, and the trade calls it the flat rate or simply the flat.

The flats are not forecasts of what freight will cost. They are calculated for a single hypothetical ship, the standard vessel, on a uniform set of assumptions: a stated service speed, a stated number of days in port, a full cargo, and a stated basis for fuel price, port charges and canal tolls. The whole schedule is built so that the standard vessel, fixed at exactly WS 100, would earn the same notional daily return on every route in the book, whether that route is a two-day coastal hop or a laden passage halfway round the world.

The arithmetic

Once you have the flat, the sum is one line and does not depend on ship size:

Freight (USD)  =  Quantity (mt)  x  Flat rate (USD/mt)  x  Points / 100

  80,000 mt cargo
  Flat rate for the voyage       12.00 /mt   (illustrative, not a schedule figure)
  Fixed at                       WS 92.5

  80,000 x 12.00 x 0.925  =  888,000

That is the entire conversion. The flat comes out of the schedule for the specific load and discharge terminals, not for the region and not for a similar voyage.

Why the convention survives

Because it solves a real problem. An oil charterer with a dozen cargoes moving out of several load areas to several discharge areas cannot compare offers quoted in dollars per tonne: the numbers are different because the voyages are different lengths, and nothing about the ranking tells you which owner is asking for more. Quoted in points, every offer is measured against the same yardstick. A chartering manager can look down a list of WS numbers and see where the market is firm.

It also makes long-term contracts writable. A contract of affreightment fixed at a percentage of Worldscale re-prices itself when the new schedule takes effect, because the flat rebuilds on the year's port costs and fuel assumptions. Neither side has to reopen the contract for cost inflation.

The trap that catches everyone once

The flat rate resets on 1 January, and the points move to compensate. If the schedule for the new year raises the flat on a route because fuel and port costs went up, then the same real freight is now a lower WS number. Nothing happened in the market. The denominator changed.

So a WS quote from December and a WS quote from January are measured against two different scales and must not be compared directly. Every year, somewhere, a report goes out saying the tanker market fell sharply over the turn of the year when it did nothing of the sort. The correct comparison converts both quotes to dollars per tonne, or better, to a daily figure.

The second trap is the same error across routes rather than across years. WS 280 on a short-haul voyage and WS 140 on a long-haul one are not "twice as good", because they are percentages of two different flats. Short voyages routinely trade at high point numbers and long ones at low point numbers, and that pattern is an artefact of how the flats are constructed, not a signal.

Points are a quoting convention, not an earnings measure

No owner decides on points. The offer gets converted to gross freight, the voyage costs are deducted, and the result is divided by the voyage days to give a time charter equivalent. That daily number is what gets compared with the last fixture, with a period rate, and with the ship's breakeven. The Baltic Exchange publishes its tanker route assessments on both bases for exactly this reason: the points are how the market talks, the daily figure is how it decides.

The conversion is also where the standard vessel assumption stops helping. The schedule's ship is not your ship. A modern eco tanker and a twenty-year-old unit fixed at the same WS number on the same route produce very different daily earnings, because the fuel bill and the speed are different. The flat rate neutralises the voyage, never the vessel.

What Worldscale does not cover

Reading a tanker report properly

Three questions turn a WS number into information. Which route, exactly, since the flat is voyage specific. Which schedule year, since the denominator resets. And what quantity, since the freight is the product of all three and a charterer's option on quantity moves the money before the rate does. A report that gives the points and omits the route has communicated a number, not a market.

References

Tanker sizesHandy to ULCC: where the tanker bands sit, and why the coating and the last three cargoes decide suitability, not the deadweight. Time charter equivalentFreight per tonne means nothing next to hire per day until you divide it by the voyage. This is the arithmetic that does it. Freight markets and the Baltic indicesThe BDI is a panel of brokers' judgement on defined routes, not a price anybody paid. What it is for, and what it will not tell you about your ship. Bunker pricing and hedgingFuel is usually the largest single voyage cost and the only one quoted as a market that moves daily. Where the price comes from, and the three ways to stop it moving.

Neptune Atlas

A Worldscale quote has to become a rate per tonne before it can be estimated, and the flat rate for the route is not something Neptune Atlas holds. The estimator does the half after that: freight, bunkers, port costs and days into one daily figure. Every paid plan starts with 7 free days. A card is needed to start them, and cancelling before they end costs nothing.

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