A dry bulk freight rate is the price an owner charges to move cargo by sea, and most of the time it is built from two numbers: a unit rate and a cargo quantity. The headline figure you see quoted is rarely the whole story, because the rate has to absorb the full cost of the voyage and still leave the owner a daily return. This page explains the mechanics rather than any market level.
How are dry bulk freight rates calculated?
A dry bulk freight rate is calculated as a unit rate multiplied by the cargo quantity. In its simplest per-tonne form the gross freight is:
Freight = freight rate per tonne x cargo quantity in tonnes
Where:
- Freight rate per tonne is the agreed price to carry one tonne of cargo from the load port to the discharge port, expressed in US dollars per metric tonne.
- Cargo quantity is the tonnage actually loaded, usually a base quantity with an agreed tolerance (for example “50,000 tonnes, 10 percent more or less in owner’s option”). The party who chooses within that tolerance is set in the charter party.
- Gross freight is the result before deductions such as address commission and brokerage.
Two layers sit underneath this single line. First, the unit rate itself is not arbitrary: an owner works backwards from the voyage estimate, adding up every cost of the trip and a target daily profit, then dividing by the cargo to get a rate that makes the voyage worthwhile. Second, published route assessments such as those produced by the Baltic Exchange give the market a common reference for what a given trade is worth on a given day, which owners and charterers use as a starting point for negotiation. The number you finally agree is a negotiated price, not a formula output, but the formula is what both sides check it against.
For a fuller treatment of how the unit price is set and quoted, see the freight rate explainer and the broader ship chartering hub.
Lumpsum versus per-tonne freight
The same voyage can be priced two ways, and the choice changes who carries the risk of the exact tonnage loaded.
Per-tonne freight ties the payment to the cargo lifted. Load more and the owner earns more; load less and they earn less. This is the default for homogeneous bulk cargoes where quantity is known fairly precisely and the owner wants to be paid for what actually goes on board.
Per-tonne freight = rate per tonne x tonnes loaded
Lumpsum freight is a single fixed sum for the voyage regardless of how much cargo is loaded, up to the vessel’s capacity. The charterer pays the agreed lump whether the holds end up full or part-empty, so the owner is protected against a short-loaded cargo while the charterer keeps any upside from squeezing in extra tonnage.
Lumpsum freight = a single agreed sum for the voyage (independent of tonnes loaded)
A simple way to compare the two: divide a lumpsum by the expected cargo quantity to get an implied per-tonne rate, or multiply a per-tonne rate by the expected cargo to get an implied lumpsum.
Implied per-tonne rate = lumpsum / expected cargo quantity
Lumpsum pricing is common where the cargo is awkward to measure, where stowage is uncertain, or where the charterer wants cost certainty. Per-tonne pricing dominates standard bulk trades. Both feed the same underlying voyage economics. The pricing structure only decides who absorbs the variance in loaded quantity.
The voyage costs behind a freight rate
A freight rate has to cover the full cost of the round trip before any profit appears. On a voyage charter the owner pays the voyage costs out of the freight, so every item below is effectively baked into the rate:
- Bunkers (fuel). Usually the single largest variable cost. The owner pays for fuel burned at sea and in port, at the prices ruling on the route. See bunkers for how fuel is priced and managed.
- Port costs and canal dues. Port entry, berth, pilotage, towage, agency fees at both load and discharge ports, plus any canal transit tolls.
- Cargo-handling costs. Loading and discharging expenses, which may sit with owner or charterer depending on the agreed terms (for example free-in-and-out arrangements).
- The daily running cost of the ship. Crew, stores, insurance, maintenance, and the owner’s capital cost, expressed as a daily figure and multiplied by the number of voyage days.
- Time risk: laytime and demurrage. If the charterer holds the ship beyond the agreed laytime, they pay demurrage. The owner prices in the expected port time, and demurrage compensates for overruns.
- Commissions. Address commission to the charterer and brokerage to the brokers, deducted from gross freight.
Sum these costs, decide a target daily profit, and you have the revenue the voyage must generate. Divide that revenue by the cargo quantity and you have the per-tonne rate the owner needs. This is the chain that converts a pile of cost line-items into a single quoted number.
Worked example: a Supramax voyage
The figures below are illustrative only. They are not a market quote and are chosen to make the arithmetic clear. The aim is to show how the pieces fit, using a single Supramax voyage as the unit of analysis.
Assume an owner is offered a per-tonne rate and wants to check what the voyage earns.
| Item | Illustrative value |
|---|---|
| Cargo quantity loaded | 50,000 tonnes |
| Freight rate | US$20.00 per tonne |
| Gross freight | US$1,000,000 |
| Address commission + brokerage (5%) | US$50,000 |
| Net freight | US$950,000 |
Now subtract the voyage costs the owner must pay:
| Voyage cost (illustrative) | Amount |
|---|---|
| Bunkers | US$300,000 |
| Port costs and canal dues | US$120,000 |
| Cargo-handling (owner’s account) | US$80,000 |
| Total voyage costs | US$500,000 |
So gross freight is rate x quantity = US$20.00 x 50,000 = US$1,000,000. After commissions, net freight is US$950,000. Subtracting US$500,000 of voyage costs leaves US$450,000 to cover the ship’s daily running cost and profit over the voyage. Whether that is a good result depends entirely on how many days the voyage takes, which is exactly what the next section measures. Larger ships such as a Panamax or Capesize scale the cargo quantity up, but the structure of the calculation does not change.
Time charter equivalent: linking voyage rate to daily rate
A per-tonne freight rate and a daily hire rate look like different currencies, and the time charter equivalent (TCE) is the conversion that puts them on the same footing. TCE expresses what a voyage earns the ship per day, so it can be compared directly against the daily rate the same ship could earn on a time charter.
TCE = (gross freight - voyage costs) / voyage days
Where:
- Gross freight is rate x quantity (or the lumpsum), as above.
- Voyage costs are the owner-paid costs: bunkers, port costs, canal dues, and cargo-handling on the owner’s account. Note that the ship’s own daily running cost is deliberately excluded, because TCE is measured before running cost so it can be set against a time-charter hire rate on a like-for-like basis.
- Voyage days is the total round-trip duration: ballast leg to the load port, time in port loading, the laden sea passage, and time in port discharging.
Take the illustrative voyage above. Net-of-cost earnings were US$450,000 (using net freight) or, working from gross freight of US$1,000,000 less US$500,000 of voyage costs, US$500,000 before commission. Using the gross-freight version and assuming the round trip takes 40 voyage days:
TCE = (US$1,000,000 - US$500,000) / 40 days = US$12,500 per day (illustrative)
That daily figure is what an owner compares against the prevailing time-charter market and against the daily running cost of the ship. If the TCE on a voyage charter beats the daily hire on offer for the same vessel, the voyage is the better deal, and vice versa. This is why brokers translate every fixture into a TCE: it is the common denominator across spot voyages, route assessments, and period employment. The Baltic Exchange’s route assessments are commonly expressed or convertible into TCE precisely so that voyage rates on different trades can be compared.
An edge case worth flagging: the number of voyage days is itself uncertain. If the ship is delayed at port beyond the agreed laytime, demurrage revenue may be added to the freight side, but the extra days also lengthen the denominator. A voyage that earns demurrage is not automatically a better voyage, because the same delay that pays demurrage can drag the TCE down if the daily demurrage rate is below the TCE the ship would otherwise make. Currency rounding matters too: port costs and bunkers are often incurred in mixed currencies and converted to US dollars at the rate ruling on the day, so a TCE quoted to the dollar is always an estimate rather than a settled figure.
What the headline rate leaves out
The headline freight rate is a single quoted number, and several things it does not directly show can move the economics of a voyage as much as the rate itself.
- It does not show the cargo split of costs. Whether loading and discharging are on the owner’s or charterer’s account changes the net result without changing the quoted rate at all.
- It does not show ballast. A rate that looks strong can be eroded by a long, unpaid ballast leg to reach the load port. The market often distinguishes a route’s published level from the round-voyage TCE for exactly this reason.
- It does not show bunker exposure. Because fuel is usually the biggest variable cost, a rate agreed before a fuel-price move can look very different by the time the voyage runs. Some fixtures use a bunker adjustment to share that risk.
- It does not show port-time risk. The same rate is worth less if the ports are congested, because every extra day in port lowers the TCE even when laytime and demurrage are agreed.
- It is a negotiated price, not a published truth. Index assessments such as the Baltic Exchange’s describe the market; the rate on a given fixture is what two parties agreed, which can sit above or below the assessment.
The practical takeaway: read a freight rate together with the cargo quantity, the cost split, the route’s ballast leg, and the expected port time. The rate is the headline. The TCE is the conclusion.
Scope and what this page does not cover
This page explains the mechanics of how dry bulk freight rates are constructed and converted: the freight calculation, lumpsum versus per-tonne pricing, the voyage costs behind a rate, and the time charter equivalent. It is a timeless explainer, not market commentary.
It does not provide current rate levels, forecasts, or a view on where rates are heading. For live route assessments and indices, the Baltic Exchange is the standard reference; for the legal mechanics of charter parties, BIMCO publishes the widely used standard forms. The arithmetic and definitions used here are general and illustrative. Any concrete figures in the worked example are labelled illustrative and are not market quotes.
For deeper treatment of related mechanics, see demurrage and laytime on the time side, the routes and markets hub including the Baltic trades, and the cargo-specific economics of iron ore and coal on the dry bulk shipping hub.