What is a voyage estimate and how is it calculated?
A voyage estimate is the profitability sum a broker or owner runs before fixing a cargo. It nets gross freight against commission, bunkers, port costs and canal fees, then divides the result by voyage days to give a time charter equivalent (TCE), a USD-per-day figure that decides go or no-go.
The voyage estimate is the single calculation that turns a cargo order into a commercial decision. A charterer circulates a parcel: so many tonnes, from a named load port to a named discharge port, within a laycan window, at a freight idea in dollars per tonne. The owner cannot say yes or no to that freight until it knows what the freight earns per day once the voyage is paid for. The voyage estimate is how that number is found. It collapses a multi-leg, multi-cost voyage into one comparable daily rate, the TCE, so the owner can line it up against what the same vessel would earn on a time charter or on the next competing cargo.
Because freight on a voyage charter is quoted per tonne but a ship earns per day, the estimate is the bridge between the two. Two cargoes at the same dollar-per-tonne freight can produce wildly different TCEs once distance, port time and bunker price are accounted for. The longer voyage, the slower port, or the more expensive bunker grade quietly erodes the daily return even though the headline freight looks identical. The estimate is what exposes that gap before the fixture is committed, which is why every dry-bulk desk runs one on every serious cargo order.
The time charter equivalent formula
The estimate reduces to a single formula. Stated plainly, the time charter equivalent is gross freight minus commission minus bunkers minus port costs minus canal fees, all divided by voyage days. Voyage days are loading days plus sailing days plus discharging days. Sailing days are distance divided by speed times twenty-four. The formula in symbol form, where symbols are unambiguous, is below.
Each variable has a defined source and unit:
- gross freight: the freight rate in USD per tonne times the cargo quantity in tonnes. This is the top line the charterer pays before any deductions.
- commission: the brokerage and address commission, expressed as a percentage of gross freight and subtracted from it. On a brokered fixture this is typically 1.25 percent brokerage plus 2.5 percent address commission to the charterer.
- bunkers: the cost of fuel burned over the voyage, equal to the tonnes consumed at sea and in port multiplied by the bunker price in USD per tonne. Consumption is split into a sea rate and an in-port rate.
- port costs: the disbursements at the load and discharge ports, covering agency, pilotage, towage, berth dues and similar charges, expressed as a lump sum in USD.
- canal fees: the transit dues if the routing uses the Suez or Panama Canal, otherwise zero. A longer Cape route carries no canal fee but adds distance and therefore bunkers.
- voyage days: the total elapsed days from the start of the ballast leg to completion of discharge, being loading days plus sailing days plus discharging days.
- sailing days: total distance in nautical miles divided by the service speed in knots times twenty-four hours, so a 3,600 nautical mile passage at 13 knots takes 3,600 divided by 312, about 11.5 days.
- loading and discharging days: cargo quantity divided by the agreed load or discharge rate in tonnes per day. These are the same rates that drive the laytime allowance in the charter party.
The TCE that falls out the bottom is the number every other voyage is judged against. A figure that beats the prevailing market rate for the vessel class is a go. A figure below it is a no-go unless the owner has a positioning reason to take the cargo anyway.
How to build a voyage estimate step by step
The estimate is built in a fixed order, each step feeding the next. The sequence below is how a desk works a cargo order from the freight idea through to the go or no-go decision.
- 01
Take the cargo order
Receive the freight idea or cargo order: quantity, load and discharge ports, laycan and a freight rate in dollars per tonne. This is the starting point the estimate is built around.
- 02
Fix quantity and stem
Confirm the cargo quantity and stem against the vessel's deadweight and the load-port draft, so the freight is calculated on a quantity the ship can actually lift.
- 03
Measure distance, compute sea days
Read the ballast and laden distances from a standard distance table, then divide total distance by service speed times twenty-four to get sailing days.
- 04
Cost the bunkers
Multiply sea-consumption tonnes per day by sailing days and in-port consumption per day by port days, sum the tonnes, and multiply by the bunker price for the chosen grade.
- 05
Add port costs and disbursements
Add the agency, pilotage, towage and berth dues for the load and discharge ports as a lump-sum estimate from agents or the desk's historic disbursement accounts.
- 06
Add canal dues if routed via a canal
If the lane transits the Suez or Panama Canal, add the transit dues. If the routing goes round the Cape instead, canal fees are zero but distance and bunkers rise.
- 07
Sum costs and net off freight
Subtract commission, bunkers, port costs and canal fees from gross freight to get the net amount available to the vessel for the voyage.
- 08
Divide by voyage days for the TCE
Divide the net amount by total voyage days (loading plus sailing plus discharging) to get the time charter equivalent, the USD-per-day return.
- 09
Compare to market and decide
Line the TCE up against the prevailing market rate for the vessel class on the lane and decide go or no-go, or use it as the floor for a counter on freight.
The discipline is in the order: distance before bunkers, bunkers and port time before the cost sum, the cost sum before the division. Skip a step and the TCE is wrong in a way that is hard to spot, because the single output number hides the input that broke it.
A worked voyage estimate
Take a representative, anonymised cargo: a Panamax of about 76,000 deadweight tonnes, lifting 75,000 metric tonnes of coal from Kalimantan in Indonesia to the East Coast of India, at a freight idea of USD 8.50 per tonne. The estimate reconciles line by line as follows.
| Item | Value | Note |
|---|---|---|
| Gross freight | USD 637,500 | 75,000 mt × USD 8.50 per tonne |
| Commission (3.75%) | USD 23,906 | 1.25% brokerage + 2.5% address on gross freight |
| Distance | 3,600 nm | 600 nm ballast to load port + 3,000 nm laden |
| Service speed | 13 knots | Sea days = 3,600 ÷ (13 × 24) = 11.54 days |
| Loading days | 3.00 days | 75,000 ÷ 25,000 t per day |
| Discharging days | 4.17 days | 75,000 ÷ 18,000 t per day |
| Port days | 7.17 days | Loading + discharging |
| Voyage days | 18.7 days | 11.54 sea + 7.17 port (rounded) |
| Bunkers at sea | 277 t | 24 t per day × 11.54 days |
| Bunkers in port | 21.5 t | 3 t per day × 7.17 days |
| Total bunkers | about 298 t | Sea + port consumption |
| Bunker cost | USD 173,000 | about 298 t × USD 580 per t (rounded) |
| Port costs and disbursements | USD 110,000 | Two ports, agency, pilotage, towage, dues |
| Canal fees | USD 0 | This lane uses no canal |
| Net for TCE | USD 330,594 | 637,500 − 23,906 − 173,000 − 110,000 − 0 |
| Time charter equivalent | about USD 17,700 per day | 330,594 ÷ 18.7 ≈ 17,680, rounded |
Read the sheet from the top. Gross freight of USD 637,500 is the freight rate times the stem. Commission of USD 23,906 is 3.75 percent of that gross. Bunkers cost USD 173,000, being about 298 tonnes at USD 580 per tonne. Port costs add USD 110,000 across the two ports, and this lane carries no canal fee. Subtracting commission, bunkers, port costs and canal fees from gross freight leaves USD 330,594 net for the vessel. Dividing that by 18.7 voyage days gives a TCE of about USD 17,680 per day, which rounds to about USD 17,700 per day. Figures are rounded to whole dollars on costs and to the nearest hundred dollars per day on the TCE, so the final division carries a few dollars of rounding either way. The decision then turns on one question: does about USD 17,700 per day beat what this Panamax could earn on the next cargo or on a short time charter? If yes, the desk fixes. If no, it counters on the freight rate or passes.
The input variables and where they come from
Every figure in the estimate has a source. The table below lists the inputs in the order a desk gathers them, with the negotiable charter-party terms linked to their detail pages. It doubles as the main-terms reference for the fixture.
| Input | Representative value | Source |
|---|---|---|
| Vessel and tonnage | Panamax, about 76,000 dwt | Owner's open position and vessel particulars |
| Cargo | Coal | Cargo order from the charterer |
| Quantity | 75,000 mt | Stem confirmed against deadweight and load-port draft |
| Laycan | Laycan window agreed in the recap | Negotiated; sets when the ship must tender NOR |
| Load and discharge ports | Kalimantan to East Coast India | Cargo order; drives distance and port costs |
| Freight rate | USD 8.50 per tonne | Freight idea, negotiated against the estimate |
| Laytime | Laytime at the agreed load and discharge rates | Charter party; sets the port-day allowance |
| Demurrage | Demurrage rate per day, pro rata | Charter party; a downside risk, not a base-case input |
| Commission and brokerage | 3.75% (1.25% brokerage + 2.5% address) | Brokerage agreement and charterer's house commission |
| Charter party form | Voyage charter, GENCON family | Recap; sets cost allocation and laytime regime |
| Distance | 3,600 nm (600 ballast + 3,000 laden) | Standard distance table (BP Shipping or AXSMarine) |
| Service speed | 13 knots | Vessel description and weather margin |
| Bunker price | Bunker at about USD 580 per t VLSFO | Bunker price reporting, Ship & Bunker or Platts |
| Port costs | USD 110,000 across two ports | Agents' proformas or historic disbursement accounts |
The negotiable terms in the upper rows are the same terms a broker carries into the recap: freight rate, laytime, demurrage, laycan, commission and the charter party form. The lower rows are the estimate-specific technical inputs that the desk supplies from distance tables, vessel descriptions, bunker reports and agents’ proformas. The estimate is only as good as those sources, which is why a desk keeps its own disbursement history and a current bunker feed rather than carrying stale assumptions.
Non-obvious inputs: bunkers, canal routing and ballast
The headline inputs are easy. The inputs that decide whether the estimate is right are the ones that are easy to get wrong.
Bunker price and grade. Bunkers are usually the largest single cost in the sum, and the estimate is sensitive to both the price and the grade assumed. Since the IMO 2020 sulphur cap, a vessel without a scrubber burns very low sulphur fuel oil (VLSFO), while a scrubber-fitted ship can burn cheaper high sulphur fuel oil (HSFO). The two grades can differ by a hundred dollars or more per tonne, and on a 298 tonne burn that is a swing of around USD 30,000 in the cost sum, enough to move the TCE by well over a thousand dollars a day. The estimate must therefore use the grade the specific vessel actually burns and a current price, taken from a reporting service such as Ship & Bunker or Platts, not a round-number placeholder. A stale bunker price is the most common reason a real estimate misses.
Canal routing. Where a lane could go through the Suez or Panama Canal or round the Cape, the routing is a commercial choice the estimate has to make explicit. The canal route is shorter, so it burns less fuel, but it carries transit dues that can run into six figures for a laden bulk carrier. The Cape route avoids the dues but adds distance and therefore bunkers and voyage days. The desk runs the estimate both ways and takes the routing with the better TCE. The worked example above uses an Indonesia to India lane with no canal, so canal fees are zero, but the same cargo from the Atlantic would force the choice between Suez dues and a longer Cape passage.
Ballast leg and ballast bonus. The ship rarely starts the voyage at the load port. In the worked example the 600 nautical mile ballast leg to the load port is unpaid distance: the vessel burns fuel and consumes days carrying no cargo, yet that cost sits inside the same TCE. A long ballast leg can sink an otherwise healthy freight. On some fixtures the owner negotiates a ballast bonus, a lump sum that compensates for positioning to the load port, which is then added back into the freight side of the estimate. Related to this is the weather and speed margin: estimates are run at a service speed that already discounts the vessel’s calm-water speed for expected weather, because building the estimate at full speed understates sea days and overstates the TCE. Address commission and the currency of any non-USD port costs round out the inputs that a careful estimator pins down before relying on the output.
Scope and what this page does not cover
This page explains the voyage estimate as a commercial calculation: the time charter equivalent formula, the order in which the estimate is built, a worked Panamax coal example, the inputs and their sources, and the non-obvious assumptions that move the result. It does not provide live freight, bunker or port-cost figures, run an estimate for a specific named cargo, opine on the routing or speed warranty for a particular vessel, or replace a desk’s estimating software and its own disbursement and distance data. All figures here are representative and anonymised, not market quotes, and any real go or no-go decision should be made on current Baltic Exchange route assessments, a live bunker price and confirmed agents’ proformas, working with a desk-side ship-brokering adviser.