Voyage estimating. This is the activity earned out by owners, charterers, shipbrokers, and/or charterers’ agents, to determine the return for any potential voyage on a voyage charter, after deducting, from the freight revenue, the running costs and other expenses during the voyage.
The estimate finally gives the breakeven costs for a shipowner, beyond which he negotiates a freight rate for the cargo on the voyage. The break-even freight rate is convened to a “time charter equivalent” (TCE) so that a comparison can be made by the owner between fixing the vessel on a voyage charter that is offered or on a time charter.
The charterer uses voyage estimating in a somewhat different manner and for a different reason. He can estimate what various owners who are offering their ships to him will face in costs and what their likely break-even points will be, so that he can begin negotiations from a lower level and find a cheaper vessel. The compromise after long negotiations depends on how badly the charterer wants a particular vessel and how much profit the owner desires. The final freight rate is, of course, also influenced by what the market rates are for that particular voyage.
A secondary use of Voyage Estimating is to compare the revenue with the total costs for different voyages for the same vessel and for different vessels. This may then assist with the management of the vessels.
Voyage Estimating is mainly carried out by the owners (or their brokers) who know the actual running costs and can then make a reasonable estimate of the port and other voyage costs based on their past experience or on information from BIMCO in their publication “Port Costs”.