Time Charter Equivalent (TCE) is a benchmark used in the shipping industry to compare the performance of vessels operating under different charter types. It is a measure of the average daily revenue that a vessel generates while on charter, taking into account voyage expenses such as fuel, port charges, and canal fees. TCE is calculated by dividing the total revenue generated by the vessel during a specific period by the number of days the vessel was on charter.
For example, if a vessel generates $100,000 in revenue over a 30-day charter period, the TCE would be $3,333 per day ($100,000 / 30 days). This metric allows shipping companies to evaluate the profitability of their vessels and make informed decisions about chartering arrangements.
How is Time Charter Equivalent Calculated?
The formula for calculating Time Charter Equivalent is as follows:
TCE = (Total Revenue – Voyage Expenses) / Number of Charter Days
Total Revenue includes the charter hire paid by the charterer, as well as any additional income generated from services such as bunkering or port services. Voyage Expenses typically include fuel costs, port charges, canal fees, and any other direct expenses incurred during the charter period.
By calculating TCE, shipping companies can assess the financial performance of their vessels and compare them to industry benchmarks. This metric helps companies identify opportunities to improve efficiency, reduce costs, and maximize profitability in a competitive market.
Conclusion
Time Charter Equivalent is a valuable metric used in the shipping industry to evaluate the financial performance of vessels on charter. By calculating TCE, companies can make data-driven decisions to optimize their operations and increase profitability. Understanding TCE is essential for shipping professionals looking to stay competitive in a dynamic and rapidly evolving market.