Time Charter Equivalent (TCE)
Contents
Unlocking the Secrets of Time Charter Equivalent (TCE)
Understanding Time Charter Equivalent
Time Charter Equivalent (TCE) serves as a crucial metric in the shipping industry, providing a means to gauge the average daily revenue performance of vessels. By subtracting voyage expenses from voyage revenues and dividing the total by the round-trip voyage duration in days, TCE offers insights into period-to-period changes for shipping companies.
Deciphering TCE Calculation
TCE is calculated using the formula: (Voyage Revenues - Voyage Expenses) / Round Trip Duration in Days. This measure can also be evaluated on a per-day basis, considering period, spot, and weighted averages. While TCE revenue is a non-GAAP measure, companies often include it as a footnote in their financial statements to track performance over time.
Utilization of TCE in the Shipping Industry
Cargo brokers utilize TCE to present chartering opportunities to shipowners, facilitating standardized comparisons based on dollars per day. This metric streamlines decision-making processes by providing a clear understanding of potential revenues and costs associated with different chartering opportunities.
Significance of Per-Day Costs
Fuel and crew upkeep costs represent significant variables in voyage expenses, directly influenced by the speed of the vessel. Slower sailing speeds result in reduced fuel consumption but extend the duration of the voyage, impacting TCE calculations. Shipowners must carefully consider the trade-off between fuel cost savings and reduced TCE when determining optimal sailing speeds.