What is TCE (time-charter equivalent)?

How is it calculated?

Take what a voyage earns, subtract the costs of making that voyage, and divide by the days it took. Voyage costs are the ones that come with the trip itself: fuel (bunkers), port charges and canal tolls.

An example with round numbers, not a market figure: a voyage earns $3.0 million in freight and takes 50 days. Fuel, port and canal costs come to $1.0 million. Its TCE is ($3.0m − $1.0m) ÷ 50 days = $40,000 a day.

The costs of owning and running the ship (crew, insurance, maintenance, financing) are not voyage costs. They come off later, on the way to profit and dividends.

Spot or time charter?

On a spot (voyage) charter the owner is paid for one cargo and pays the voyage costs. Its earnings move with the market from one voyage to the next, and TCE takes the voyage costs out.

On a time charter the charterer hires the ship for a fixed daily rate over months or years and pays the voyage costs itself. The daily hire is therefore already close to a TCE, and it stays fixed until the charter ends.

Most fleets mix the two, so a company's quarterly TCE blends fixed hire with whatever the spot voyages earned.

Why do companies print it?

Revenue on its own can mislead. When fuel prices rise, a spot voyage's freight rises with them, but the ship is not earning more once the fuel is paid for. TCE removes that effect, which is why shipping companies report it, usually per vessel class.

Many also say how many of the next quarter's days are already booked, and at what TCE. That is the starting point for any estimate of the coming quarter.

How do our pages use fleet TCE?

A company's fleet TCE on our pages is the average of its classes' rates, weighted by each class's vessel-days (glossary). For a quarter not yet reported, booked days earn the company's own printed rates and open days earn a market rate for the class (see how open days are priced). Each figure carries a label saying whether the company stated it or we computed it.

Drilling rigs and container lines earn in other units (a dayrate per rig, freight per box), and their pages use those terms instead.

How does TCE become a dividend?

On a company page that builds its own dividend estimate from the fleet, the walk runs like this:

1. Fleet TCE × vessel-days = TCE revenue for the quarter.
2. Subtract vessel operating costs (crew, maintenance, insurance), general and administrative costs (G&A) and interest.
3. Subtract scheduled debt repayment where the company pays from cash, or depreciation where it pays from profit. What is left is the payout base.
4. Apply the payout share (the company's stated policy, or the share it has actually paid) and divide by the number of shares.

An example with round numbers: 10 ships × 90 days is 900 vessel-days. At $40,000 a day, TCE revenue is $36m. Operating costs of $9m, G&A of $2m, interest of $3m and scheduled debt repayment of $5m leave $17m of cash. A company paying out 80% of it, with 50 million shares, pays about $0.27 a share.

The same example shows the cash break-even: the $19m of costs ÷ 900 vessel-days is about $21k a day. Below that TCE the fleet earns no cash to distribute. Each step, and where it can stop, is on the methodology page (what it can pay out, what that is per share).