Voyage estimation: building a TCE before fixing

Voyage estimation is the pre-fixture calculation that reduces a specific ship on a specific cargo to one comparable number: the Time Charter Equivalent in USD per day. It takes gross freight, deducts commission and freight tax, adds demurrage, subtracts bunkers, port disbursements, canal dues and European compliance cost, and divides what is left by the total voyage days including the unpaid ballast leg.

Everything else in commercial shipping is downstream of that division. A voyage charter is accepted or refused on it, a time charter offer is compared against it, a speed is chosen by it, and a canal is used or avoided because of it.

What the estimate produces, and what the TCE deliberately excludes

The output is a daily rate net of voyage costs and gross of the ship’s daily operating cost. That exclusion is deliberate and it is what makes the figure useful: a time charter hire rate is also quoted before operating cost, so the two are directly comparable, and the owner can ask whether this cargo beats the period market on the same day.

Voyage costs are the costs that exist because of this voyage: bunkers, port disbursements, canal dues, EU Emissions Trading System allowances, FuelEU Maritime exposure, and voyage extras such as hold cleaning, tank washing, hoses or extra insurance. Crew wages, stores, lubricants, maintenance, insurance, the management fee and the capital cost stay out.

The consequence is worth stating plainly, because it is the most common misreading of a TCE by people outside a chartering desk. A positive TCE is not a profitable voyage. A Capesize earning USD 11,000 per day against an operating cost near USD 6,000 and a capital cost above that is losing money on the fixture, and the estimate says so only if the reader knows what the number omits.

Gross freight: lumpsum, per tonne, and Worldscale

Gross freight arrives in one of three shapes and each produces a different risk allocation. A lumpsum pays the same figure whatever is loaded, so quantity risk sits with the charterer and no deadfreight question arises.

A per-tonne rate multiplies the freight rate by the cargo intake, which puts the intake calculation on the critical path of the estimate. A Worldscale fixture multiplies cargo tonnes by the published flat rate for the route and then by the fixture percentage divided by 100, so WS 180 on a flat rate of USD 22.00 per tonne pays USD 39.60 per tonne.

The Worldscale mechanics matter to the arithmetic. Flat rates are recalculated annually, published each November and effective from 1 January to 31 December, built on cost inputs assessed over the preceding 1 October to 30 September. Fixed differentials are added to the flat rate before the percentage is applied, and the percentage is never applied to a fixed differential, which is set out with the rest of the structure in Worldscale flat rates and differentials .

Deductions from gross freight before the division

Two percentages come off the top. Address commission and brokerage are both struck on gross freight: address commission is retained by the charterer, brokerage is paid by the owner to the broking houses that worked the fixture. In dry bulk the common shape is 3.75 percent address plus 1.25 percent brokerage; in tankers a combined 2.50 to 3.75 percent is more usual and the Baltic Exchange TD3C route model applies 3.75 percent in total.

Freight tax is different in kind. A withholding levied at the load or discharge country is a deduction from gross freight rather than a voyage cost, and in most regimes it bites on the gross figure rather than the margin. Its incidence turns on the trade and on any treaty exemption, and the charterparty allocates it, so an estimate carries the structure and the specific national rate is read before it is used.

Net freight is therefore gross freight multiplied by one minus the commissions, less any freight tax.

Cargo intake: deadweight, cube and draft, whichever binds first

The intake is the smallest of three limits, and which one binds changes the whole estimate. Deadweight available is the summer deadweight less bunkers on board, fresh water, stores, and the ship’s constants, and it is the binding limit for a dense cargo such as iron ore.

Cubic capacity binds for a light cargo. The test is the cargo’s stowage factor in cubic metres per tonne against the ship’s grain or bale capacity, and a cargo that cubes out leaves deadweight unused no matter how deep the ship could load.

Draft binds independently of both. A port sill, a river passage or a seasonal load line zone can cap the intake below either of the other limits, and a ship loading for a winter North Atlantic crossing loads to the winter mark rather than the summer mark. Where the charterer fails to supply the agreed minimum against any of these, the shortfall is deadfreight and the owner’s recovery is a charterparty question rather than an estimating one.

Voyage days: the denominator that decides the answer

Total voyage days are ballast sea days plus laden sea days plus load port days plus discharge port days plus canal transit days plus waiting and idle days. Sea days on a leg are the distance in nautical miles divided by the product of speed in knots and 24, multiplied by one plus the weather margin.

The weather margin is an allowance for added resistance from wind, sea and current. The Baltic Exchange TD3C model uses 5 percent, which is the working default; a winter North Atlantic or North Pacific leg justifies more. Routing choice sits upstream of this number, and the trade-off between the shortest great-circle track and the least-resistance track is the subject of voyage planning and weather routing .

Port days are the cargo quantity divided by the agreed load or discharge rate, plus berth waiting. Waiting is where an estimate is most often wrong, because a queue is a market condition rather than a ship property, and port call optimisation can move several days on a congested berth. Canal transits carry one day each plus convoy or slot waiting.

Bunkers: grades, zones and the price basis

Bunkers are usually the largest single voyage cost and often exceed half of gross freight. Fuel per leg is the daily consumption at the assumed speed multiplied by the sea days on that leg, split by grade and by zone.

The zone split is a regulatory one. Non-ECA sea time burns VLSFO at a maximum 0.50 percent sulphur under MARPOL Annex VI Reg.14.1.3, in force from 1 January 2020, unless the ship carries an approved exhaust gas cleaning system and can burn heavy fuel oil as an equivalent under Reg.4. Emission control area miles burn a 0.10 percent grade under Reg.14.4.3, normally marine gas oil . Grade specifications come from ISO 8217:2024 , the seventh edition, which is what an estimate is pricing when it names an RM or DM grade.

Port and idle consumption is auxiliary and boiler load, priced at the local low-sulphur grade or at gas oil in an ECA port. A crude or product tanker adds a discharge pumping load that raises the port-day burn well above a bulk carrier’s.

There is no single official bunker price. A desk prices from a Platts or Argus assessment for the intended port, cross-checked against the free daily screens, and the choice of hub matters as much as the choice of date: the same posting in early September 2026 showed VLSFO at USD 856.00 per tonne in Singapore against USD 682.00 in Rotterdam. The benchmarks and their construction are set out in bunker price indices and benchmarks , and the recovery mechanism on liner trades in the bunker adjustment factor .

Two spreads move estimates more than the absolute level. The gas oil to VLSFO spread prices every ECA mile, and at Singapore in early September 2026 it was roughly USD 390 per tonne, historically wide. The VLSFO to HSFO spread, roughly USD 200 per tonne on the same posting, is the entire economics of a scrubber-fitted ship against an unscrubbed sister on the same fixture.

Port disbursements

A port disbursement account covers port dues, pilotage, towage, mooring, agency fee, light dues, garbage and any berth or cargo charge levied on the ship. The largest single line is normally the authority’s infrastructure charge, tariffed against tonnage, and port dues alone can run to six figures on a large ship in a high-tariff port.

An estimate built before an agent’s pro forma arrives uses the ship’s own history for that port, escalated, and flags the figure as an assumption. Estimating from a corporate average across all ports is the standard way to be wrong by 50 percent, because tariffs differ by an order of magnitude between a low-cost bulk terminal and a major container port.

Suez Canal transit dues: SDR per SCNT on a seven-band scale

The Suez Canal assesses transit dues in Special Drawing Rights per Suez Canal Net Tonnage ton, on a schedule applicable from 15 January 2024 that carries thirteen vessel categories. SCNT is a canal-specific tonnage, not the ship’s tonnage under the International Convention on Tonnage Measurement of Ships, 1969, and it is certified on the Suez Canal Special Tonnage Certificate .

Each category runs on a seven-band regressive scale with separate laden and ballast columns: the first 5,000 tons, the next 5,000, the next 10,000, the next 20,000, the next 30,000, the next 50,000, and the remainder. Containerships carry an eighth band. Selected first-band rates from the Suez Canal Authority schedule applicable from 15 January 2024, in SDR per SCNT ton, laden and ballast:

Source: Suez Canal Authority, Transit Dues Rates schedules applicable from 15 January 2024.

Two structural points fall out of the table. The crude and product tanker scales are identical up to 20,000 SCNT and diverge above it, which is why an MR and a VLCC on nominally the same schedule pay very different effective rates per ton. And the cross-application notes catch cases the headline table does not: a ballast product tanker pays the ballast crude rate, a ballast combined carrier pays the ballast dry bulk rate, and rates apply according to the ship’s actual condition on the day of transit.

The Authority layers temporary percentage surcharges on this base schedule by numbered circular. Periodical No. 16/2026 of 7 June 2026 amended the crude oil tanker rate, Circular No. 2/2026 of the same date addressed containerships, and Periodicals 23 to 26 of 2026 covered RoRo, vehicle carriers, special floating units and other vessels. The base SDR schedule has not moved since 15 January 2024, but the surcharge has, so the current circular is pulled before fixing rather than carried across from a previous estimate.

Converting a Suez toll: the SDR is a daily rate

The Special Drawing Right is the IMF unit of account, valued daily against a five-currency basket under Rule O-1. On 3 September 2026 one SDR was worth USD 1.370630. The Suez Canal Authority quotes in SDR and accepts payment in ten currencies, so a toll quoted on one day and paid on another differs on the currency movement alone.

An estimate therefore carries the SDR rate it used and the date of that rate. Treating 1.370630 as a constant is the same error as treating a bunker price as a constant, and on a large tanker a one percent move in the SDR is worth several thousand dollars.

Panama Canal tolls: a fixed component plus a capacity component

The Panama Canal charges a fixed component per transit plus a capacity component, under tariff item 1010.0000 effective 1 January 2025. Tolls have been assessed on the Panama Canal Universal Measurement System since 1 October 1994, following the rules of the Tonnage Convention 1969, with one PC/UMS net ton equal to 100 cubic feet.

The fixed component runs USD 15,000 for a small regular vessel in the Others category, USD 25,000 and USD 60,000 for larger regular vessels by category and tonnage, USD 100,000 for a super vessel, and USD 200,000 or USD 300,000 for a Neopanamax. The capacity component is a rate multiplied by a billing quantity, and the billing quantity is not the same for every ship type:

Source: Panama Canal Authority, Official Tariff item 1010.0000, effective 1 January 2025.

Charging a bulk carrier on PC/UMS tonnage is the single most common error in a hand-built Panama estimate. A dry bulk vessel is charged on deadweight, and a 82,000 dwt Kamsarmax on the super rate of USD 1.50 per DWT pays a capacity component of USD 123,000, which bears no relation to what the same arithmetic on its PC/UMS tonnage would produce. Container ships are charged per TEU on capacity, on loaded boxes and on empties, having moved off PC/UMS in a transition phased from 1 May 2005 to 1 May 2007. The full structure and its history are in Panama Canal tolls .

The Panama size categories, and the draft that changes the bracket

A regular vessel has a beam under 91 feet (27.74 m); a super vessel has a beam of 91 feet or more; a Neopanamax vessel has a beam over 107 feet (32.61 m) or a length over 966 feet (294.44 m). So far this is a geometry question the ship answers once.

The trap is that the Neopanamax category also captures any vessel transiting at a tropical freshwater draft of 39 feet 09 inches (12.12 m) or greater, and any vessel routed through the Neopanamax locks because of a condition or deficiency. A ship with a super-vessel beam that loads past that draft is assessed as a Neopanamax: the fixed component moves from USD 100,000 to USD 300,000 and the reservation fee from USD 50,000 to USD 100,000. Loading the last few thousand tonnes can cost more than the freight those tonnes earn, and the estimate has to test the draft against the bracket before the intake is fixed.

Ballast transits, the freshwater charge and the transit slot

Three further Panama lines change an estimate materially. Item 1010.BA01, effective 1 January 2023, charges a vessel in ballast 85 percent of laden tolls, applied to the fixed and capacity components only; it does not apply to full-container vessels, and it does not discount the on-deck TEU rates for a non-container ship in ballast.

The freshwater charge under tariff main item 1500 is a fixed portion of USD 4,000 for a ship over 38.1 m and up to 91.44 m in length overall, or USD 10,000 above that, plus a variable portion of 0 to 10 percent of total tolls. The variable portion comes from a sigmoidal function of the official Gatun Lake depth in feet, registered at 1200 hours on the day before transit, so it is a hydrological figure the estimate cannot control and should carry as a range.

The transit reservation system charges USD 12,000 for a regular vessel, USD 50,000 for a super vessel and USD 100,000 for a Neopanamax, effective 1 January 2025, up from USD 10,500, USD 41,000 and USD 80,000 a year earlier. Cancellation costs 50 to 100 percent of the reservation tariff depending on notice. Auction slots are charged at best offer under item 1050.IBA1, with long-term slots allocated by sealed bid, so the auction is a market price and not a tariff: in a drought-constrained slot market it has at times exceeded the toll itself.

The booking decision follows from the arithmetic rather than from the fee. Compare the reservation cost against the expected unbooked waiting days multiplied by the ship’s own daily value. At USD 7,500 per day a super vessel slot pays for itself after about seven waiting days; at USD 30,000 per day, after under two.

EU ETS: an allowance cost inside the voyage costs

The European Union Emissions Trading System reaches shipping through Directive 2003/87/EC as amended by Directive (EU) 2023/959, adopted 10 May 2023. Cargo and passenger ships of 5,000 GT and above have been in scope since 2024 regardless of flag; offshore ships of 5,000 GT and above enter from 2027; offshore and general cargo ships from 400 GT up to 5,000 GT are in monitoring only from 1 January 2025, with any inclusion from 2028 dependent on a Commission report due by 31 December 2026.

Geographic scope decides the multiplier. A voyage between two EEA ports counts at 100 percent, as does time at berth and movement within an EEA port; a voyage departing an EEA port for a non-EEA port counts at 50 percent, and so does a voyage arriving from one. The surrender obligation phased in at 40 percent of verified 2024 emissions, 70 percent of 2025 emissions and 100 percent from 2027, with the deadline 30 September of the following year. Where fewer allowances were surrendered than verified for 2024 and 2025 the difference was cancelled rather than auctioned, and the 2024 cancellation was determined at 54,243,768 allowances on 14 October 2025.

Two 2026 changes belong in a current estimate. Methane and nitrous oxide enter the trading scope from 2026, having been monitored since 2024, which raises the bill for an LNG-fuelled ship with methane slip more than for a conventional one. And the underlying emissions data comes from the same monitoring, reporting and verification stream described in EU MRV voyage data , so the estimate and the compliance filing should be built off one fuel plan rather than two.

FuelEU Maritime: an annual balance, not a per-voyage charge

Regulation (EU) 2023/1805 applies from 1 January 2025 to ships above 5,000 GT carrying passengers or cargo and calling at EEA ports, regardless of flag, with the same 100 percent and 50 percent energy accounting as the ETS. It regulates the well-to-wake greenhouse gas intensity of the energy used on board, covering carbon dioxide, methane and nitrous oxide.

The reference value is 91.16 gCO2e per MJ, the 2020 fleet average, and it is not revised. The required reduction is 2 percent from 1 January 2025, giving a target of 89.33680 gCO2e per MJ, then 6 percent from 2030 (85.69040), 14.5 percent from 2035 (77.94180), 31 percent from 2040 (62.90040), 62 percent from 2045 (34.64080) and 80 percent from 2050 (18.23200). The 2040 figure is widely misquoted as 62.30; the Commission-hosted calculation guidance gives 62.90040, which is 91.16 multiplied by 0.69.

The penalty in euro is the absolute compliance balance divided by the product of the actual intensity and 41,000, multiplied by 2,400, where 41,000 MJ per tonne is the lower calorific value of VLSFO and EUR 2,400 is the rate per tonne of VLSFO-equivalent deficit. Article 23(2) multiplies it by one plus (n minus 1) divided by ten for each consecutive year in deficit, so a third year in a row carries a 20 percent uplift. A separate at-berth penalty of EUR 1.5 per kWh applies where onshore power is required and not used.

For an estimate the structural point beats the formula. FuelEU exposure is a marginal call on a fleet-level annual balance that can be banked, borrowed and pooled, not a fixed charge on this voyage, and the regulated party is the ISM company while the commercial burden is reallocated by charterparty clause. Two desks can therefore price the same voyage differently and both be right, depending on where each sits in its own compliance balance.

Demurrage and despatch in the numerator and the denominator

Demurrage is revenue and is added to net freight; despatch is a deduction. Both arise from the same comparison of used time against the laytime allowed, and on a reversible fixture load and discharge time are pooled before either is struck, which is set out in reversible laytime and despatch .

The interaction with the denominator is what makes this line awkward. Demurrage days are also voyage days, so a demurrage-heavy voyage adds revenue and adds days at the same time, and whether the TCE rises or falls depends on whether the demurrage rate exceeds the voyage’s own daily result. Demurrage is normally payable free of commission unless the charterparty provides otherwise, so it enters the numerator gross where freight enters net.

Worked example A: a Capesize round voyage with no canal

All inputs below are illustrative except where a source is named, and no freight level here should be read as a market level. The voyage is ballast Qingdao to Tubarao, load iron ore, discharge Qingdao, both legs 11,000 nautical miles via the Cape of Good Hope.

Ballast sea days are 11,000 divided by 288, or 38.19, which is 40.10 at a 5 percent margin. Laden sea days are 39.86 before margin and 41.85 after. Port and waiting time is 10.00 days, so the voyage runs 92.0 days.

Gross freight is 170,000 multiplied by USD 22.00, or USD 3,740,000. Commission at 5.00 percent is USD 187,000, leaving net freight of USD 3,553,000. Sea fuel is 2,666.0 tonnes of VLSFO at USD 856.00, or USD 2,282,096; port fuel is 30.0 tonnes of gas oil at USD 1,246.00, or USD 37,380. With USD 200,000 of disbursements and USD 15,000 of extras, voyage costs total USD 2,534,476.

The voyage result is USD 1,018,524 and the TCE is USD 11,071 per day.

What the example teaches is in the ratio, not the answer. Bunkers of USD 2.28 million against gross freight of USD 3.74 million are 61 percent of the revenue, so on this voyage the fixture is a bet on the bunker price as much as on the freight rate. A USD 50.00 per tonne rise in VLSFO costs USD 133,300 and takes USD 1,449 per day off the TCE with the freight unchanged.

Break-even freight and sensitivity

Break-even inverts the same relationship: set the target daily earning, and solve backwards for the freight. For a TCE of USD 20,000 per day on example A, the required voyage result is USD 1,840,000, the required net freight is USD 4,374,476, gross freight is USD 4,604,712 after grossing up for the 5.00 percent commission, and the break-even freight is USD 27.09 per tonne.

That single number is what a negotiation actually turns on. The USD 5.09 per tonne gap between the fixture on the table and the break-even is worth about USD 8,900 per day, and it tells the owner precisely how much room exists before the cargo stops competing with the period market.

Sensitivity is run on the three inputs that move: the freight rate, the bunker price and the port and waiting days. A day of unexpected waiting on example A costs about USD 120 per day of TCE plus the fuel burned, which sounds small until a berth queue runs to a fortnight.

Worked example B: an MR product tanker through Panama twice

The second example is short-haul and canal-heavy, which is where an estimate most often surprises the person building it. An MR2 of 50,000 dwt, 32.2 m beam and 28,000 PC/UMS tons loads 37,000 tonnes of gasoline in Houston for San Vicente, transits the Panama Canal laden, then ballasts back through the canal. The beam puts her in the super vessel bracket, and a laden tropical freshwater draft of 11.8 m keeps her below the 12.12 m Neopanamax threshold.

On an illustrative flat rate of USD 22.00 per tonne and a fixture at WS 180, freight is USD 39.60 per tonne and gross freight is USD 1,465,200. Commission at 3.75 percent leaves net freight of USD 1,410,255. The voyage runs 28.8 days: 11.11 laden sea days at 13.0 knots, 10.70 ballast sea days at 13.5 knots, 3.00 canal days for two transits with slot waiting, and 4.00 port days. Bunkers come to USD 473,322.

The canal bill is the story. The laden transit carries a USD 100,000 fixed component and a capacity component of 28,000 multiplied by USD 5.25, or USD 147,000, giving tolls of USD 247,000; the freshwater charge adds USD 10,000 fixed plus USD 12,350 at an illustrative 5 percent variable rate, and the reservation fee adds USD 50,000, for USD 319,350. The ballast transit takes the 85 percent rule on the fixed and capacity components, USD 209,950, plus the undiscounted USD 10,000 freshwater fixed portion, USD 10,498 variable and USD 50,000 reservation, for USD 280,448. Canal cost totals USD 599,798.

With USD 100,000 of port disbursements and USD 20,000 of tank cleaning and extras, voyage costs are USD 1,193,120, the voyage result is USD 217,135 and the TCE is USD 7,540 per day. The canal bill of USD 599,798 exceeds the bunker bill of USD 473,322 and is 41 percent of gross freight.

Three practitioner responses fall straight out of the arithmetic. Finding a Pacific-side cargo so the ballast leg avoids the canal drops canal cost to USD 319,350 and lifts the TCE to USD 17,277 per day before any backhaul revenue. Skipping both reservations saves USD 100,000 and USD 3,472 per day, against the risk of unbooked waiting. And had the ship loaded past 12.12 m tropical freshwater draft, the laden tolls alone would have moved from USD 247,000 to USD 391,000 on the Neopanamax rates, with the reservation doubling as well.

Worked example C: a Suez toll built band by band

A Suezmax crude tanker transits laden at an illustrative 82,000 SCNT. On the crude oil tanker laden scale, the first 5,000 tons at 11.04 SDR give 55,200 SDR; the next 5,000 at 7.82 give 39,100; the next 10,000 at 5.91 give 59,100; the next 20,000 at 2.93 give 58,600; the next 30,000 at 2.53 give 75,900; and the remaining 12,000 in the next-50,000 band at 2.17 give 26,040. The total is 313,940 SDR, or USD 430,296 at the IMF rate of 1.370630 for 3 September 2026.

The effective rate is USD 5.25 per SCNT ton against a first-band rate of 11.04 SDR, which is about USD 15.13. That gap is the regressive scale doing its work, and it is why quoting a canal cost from a headline first-band rate overstates a large ship’s toll by a factor of nearly three.

The same ship in ballast, on the ballast column, comes to 267,000 SDR or USD 365,958, about 85 percent of the laden figure. That ratio is an outcome of two published scales rather than a stated discount, which is the structural difference from Panama, where a single 85 percent factor is applied to the laden result.

Any surcharge in force at the time of transit is applied on top of this figure, so the estimate carries the toll and the surcharge as two lines rather than one blended rate.

Speed and fuel: the exponent, and where it stops holding

Effective power is total resistance multiplied by speed through water. Over the range where frictional resistance dominates and the residuary coefficient is roughly constant, resistance rises with about the square of speed and power with about the cube, and daily fuel burn tracks brake power. The classical engineering shorthand is the Admiralty coefficient, displacement to the two-thirds power multiplied by speed cubed and divided by shaft power, with typical values between 400 and 600, and the same structure appears in the ITTC speed and power trial analysis procedures where a trial displacement has to be corrected to a specified one.

The exponent is a fitted property of a specific hull in a specific loading condition, not a constant. It rises above three past the critical Froude number, where wave-making resistance grows sharply, and regression on full-scale container ship data has produced fitted values near 3.5, 4.0 and 4.5 for feeder, medium and jumbo sizes, rising with design speed. Work on noon-report data from crude tanker fleets has reported exponents below three at the speeds actually observed, and that finding is contested on the ground that draft, weather and fouling co-vary with the speed a master chooses, so the regression is not measuring the hydrodynamics alone. The practical range and its boundaries are set out in limits of the cubic speed and power law .

A chartering desk resolves the disagreement by not relying on the exponent at all. The estimate uses the ship’s warranted speed and consumption figures from the charterparty description, adjusted by the operator’s own noon-report history and by the hull’s condition since the last dry docking, which is the same evidential base a performance claim under speed and consumption warranties is fought on. Sea trial results under speed and power trials to ISO 15016 give the clean-hull anchor point.

Does slowing down improve the TCE?

Not automatically, and the framing that answers the question is marginal rather than average. Slowing by a fraction s multiplies sea days by one divided by (one minus s), cuts daily propulsion fuel by (one minus s) to the power n, and therefore cuts total leg fuel by (one minus s) to the power (n minus 1). At an exponent of three and a 10 percent speed cut, daily fuel falls 27.1 percent, total leg fuel falls about 19 percent, and the leg takes 11.1 percent longer.

The optimum sits where the marginal bunker saving from one more day equals the value of that ship-day, and the value of a ship-day is set by the freight market rather than by the ship. The consequence is counter-intuitive and worth stating flat: optimal speed rises with the freight rate and falls with the bunker price. Slow steaming is a weak-market and expensive-fuel strategy, and in a strong market the earning deferred on the next fixture outruns the fuel saved. The full treatment sits in optimum speed economics .

Two floors bound the saving. The engine has a minimum continuous rating below which combustion degrades and cold corrosion and fouling risks rise, absent a de-rating or a low-load tuning package. And auxiliary and hotel load does not scale with speed at all, so it comes to dominate at very low speeds and flattens the curve.

Speed also has a compliance consequence. A slower voyage lowers the attained operational carbon intensity indicator under MARPOL Annex VI Reg.28, introduced by MEPC.328(76) and in force from 1 November 2022, and lowers the annual ETS and FuelEU exposure per tonne carried. Where an EEXI engine power limitation has been fitted, the ceiling on available power also caps what the estimate can assume in a fair-weather leg.

Ballast allocation, ballast bonus and triangulation

Three ballast treatments are in use and none is universal, which is why two competent desks produce different TCEs for one cargo. A full round voyage counts the ballast leg to the load port plus the laden leg, which is the Baltic Exchange convention for its published route TCEs and the conservative benchmark. A one-way TCE counts only the paid leg and always reads higher. A marginal allocation charges the ballast leg only to the extent the ship would not otherwise have made it, which suits a ship already committed to reposition.

A ballast bonus is a lump sum from the charterer compensating a positioning leg with no cargo. In a voyage estimate it is revenue offsetting the ballast leg; on a time charter it is normally paid on delivery, is not hire, and desks differ over whether to credit it at delivery or spread it across the period. Check whether it is quoted net of commission, because it frequently is not.

Triangulation converts unpaid ballast days into paid laden days and therefore beats the round-voyage figure on the same market. A consecutive voyage charter extends the same logic across a chain, so the estimate is built as a series with the positioning legs internal to it, and a contract of affreightment turns the exercise into a fleet-scheduling problem where the marginal TCE of each lifting depends on the whole programme. A trip time charter sidesteps the question entirely by paying the owner per day, which is why an owner compares a trip charter against a voyage TCE rather than against a freight rate.

The owner’s estimate and the charterer’s estimate

They are different calculations of the same voyage, and confusing them is a fast way to misread a negotiation.

A charterer’s estimate of the owner’s TCE is a negotiating instrument: it shows how far the owner can be pushed before the fixture stops working. Both sides of the market build both estimates, and the shipbroker in the middle usually builds a third. The charterparty framework that allocates each of these lines is set out in the overview of charter parties , and the specific allocation questions surface as safe port warranties , off-hire and performance claims , and disputes over when freight is earned .

Reconciling the estimate against the market

An estimate is a ship-specific answer; a published index is a market level. The two are reconciled by matching the basis before comparing the number, because the Baltic Dry Index and the route assessments beneath it are built on a defined standard vessel, a defined round voyage, a stated weather margin and a stated bunker price.

Where the ship, the speed, the consumption or the employment pattern differ, the estimate should differ, and the gap is information rather than error. A triangulated employment that beats the round-voyage index is the normal case for a well-run operator, and a ship with a fouled hull that misses it is the normal case for a ship overdue for dry docking.

The forward view comes from the same place. The Baltic Exchange publishes forward assessments alongside the spot routes, and forward freight agreements let an owner or charterer fix the level the estimate assumed, which turns a spot estimate into a hedged position. On the liner side the equivalent recovery mechanisms are the surcharge structures described in ocean freight cost and surcharges .

Routing choice is reconciled the same way. The canal against cape decision is an estimate output rather than an operational preference, and since December 2023 it has carried a war risk and crew premium alongside the toll: UNCTAD recorded a record 6 percent rise in global ton-miles in 2024, close to three times the growth in trade volume, driven by rerouting rather than by trade.

Limitations

A voyage estimate is a forecast built on assumptions, and four of them carry most of the error.

Prices are stale on the day after publication. Every bunker price, allowance price and SDR rate in this article carries its date because none of them is a constant. The two bunker spreads, gas oil against VLSFO and VLSFO against HSFO, are more durable teaching than the absolute levels, and even they move.

Canal tariffs move by circular, and surcharges move faster than base schedules. The Suez base schedule has been unchanged since 15 January 2024 while surcharges have been amended repeatedly by numbered circular, and the Panama tariff has had effective dates in 2023, 2024, 2025 and 2026 across different items. Pull the current tariff and the current circular before fixing.

The auction slot has no tariff. Panama item 1050.IBA1 is charged at best offer, so a Panama estimate in a constrained slot market carries a market price that cannot be looked up.

The speed and consumption inputs are the weakest link. They come from a charterparty description written for a clean hull in good weather, and they degrade with fouling, draft and sea state. An estimate that treats them as physical constants will be optimistic, and the size of the error is what performance claims are about.

Two further caveats belong on any figure here. The illustrative freight rates, flat rates, tonnages and consumptions in the worked examples are chosen to show the arithmetic and are not market levels. And the treatment of freight tax, the FuelEU per-fuel emission factors and the carbon factors per tonne of fuel are deliberately left as structure rather than numbers, because each turns on an instrument text that has to be read for the specific trade rather than assumed.

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