What Is the Time Charter Equivalent (TCE)?
Time charter equivalent (TCE) is a shipping industry measure used to calculate the average daily revenue performance of a vessel. Time charter equivalent is calculated by taking voyage revenues, subtracting voyage expense, including canal, bunker and port costs, and then dividing the total by the round-trip voyage duration in days. It gives shipping companies a tool to measure period-to-period changes.
Understanding Time Charter Equivalent (TCE)
The time charter equivalent is calculated as:
Voyage Revenues - Voyage Expenses
Round Trip Duration in Days
It can also be calculated on a per-day basis based on period, spot and weighted average.
TCE revenue is used as a measure of performance to track performance from period to another, but is a non-GAAP measure. Companies may still choose to report it in their financial statements as a footnote.
The TCE is used by cargo brokers in the shipping industry to present chartering opportunities to shipowners. Chartering opportunities differ widely in potential revenues and costs. The TCE is a way to describe these opportunities in a standardized way — essentially dollars per day — making comparisons easier for shipowners.