Time charter equivalent (TCE): formula and worked example
A freight of USD 32 per tonne and a hire of USD 15,000 per day look like different currencies. Time charter equivalent (TCE) converts the voyage offer into a daily figure, so a shipowner can compare it with time charter business and a charterer can see what the owner is really earning.
The TCE formula
TCE = (freight revenue − voyage costs) ÷ voyage days.
Freight revenue is the gross freight (and any demurrage earned). Voyage costs are the costs an owner would not pay on a time charter: bunkers, port costs, canal dues and commissions. Voyage days include the ballast leg to the load port, port time and the laden passage.
What goes into voyage costs
- Bunkers for ballast, laden passage and port time
- Port charges and agency fees at load and discharge ports
- Canal or strait dues where applicable
- Address commission and brokerage on freight
- Extra insurance, for example for war-risk areas
A worked TCE example
Illustrative figures, not a market quote: 30,000 mt at USD 32.00 per mt, 3.75% total commission, a 30-day round voyage including the ballast leg.
| Line | USD |
|---|---|
| Gross freight (30,000 × 32.00) | 960,000 |
| Less commissions (3.75%) | −36,000 |
| Less bunkers | −220,000 |
| Less port costs, both ends | −110,000 |
| Net voyage result | 594,000 |
| Divided by voyage days | 30 |
| TCE per day | 19,800 |
How owners use TCE
An owner compares the TCE of each cargo on offer with the hire available on time charter for the same ship and position. A cargo with a higher freight rate can still give a lower TCE if it needs a long ballast leg or has slow ports. Operating costs (crew, maintenance, insurance) are left out, because they are the same whichever employment the owner chooses.
How charterers use TCE
A charterer can turn the idea around: take the time charter rate for the right ship size, add the voyage costs, and divide by the cargo to see the freight per tonne a fair voyage offer should approach. That is a quick check on whether an offer is keen or expensive.
Common mistakes
- Leaving out the ballast leg, which inflates the TCE
- Using optimistic port time instead of realistic terminal performance
- Forgetting commissions, which apply to gross freight
- Mixing currencies or bunker prices from different dates
Frequently asked questions
- What is TCE in shipping?
- Time charter equivalent: the net daily earning of a voyage after deducting voyage costs from freight, so it can be compared with time charter hire.
- Does TCE include operating costs?
- No. Crew, maintenance and insurance are deducted separately when calculating profit, because they do not depend on the type of employment.