Amended TCE Ocean Freight Calculations

Capesize Freighter
Image:  https://www.seatrade-maritime.com/

S&P Global Platts is the commodity arm of the parent company S&P Global. Platts is a provider of energy and commodities information and is the primary source of benchmark price assessments in the physical commodity markets along with in-depth analytics. For over 100 years Platts has brought clarity and transparency to the commodities markets.

Platts Bunker Charges (PCBs) provide the container market with better tools for managing exposure to volatility and bunker prices and container freight by providing independent indexes.

PCBs are fully independent and transparent tools negotiating bunker charges in container freight, leveling the playing field for shippers, carriers, and logistics providers by acting as a replacement for the current Bunker Adjustment Factor (BAF) system, alongside additional Low Sulphur Surcharge (LSS) and Marine Fuel Recovery (MFR).

The issue with BAFs across global container market is lack of standardization and transparency in the underlying formulas.   Shippers and logistics companies face a multitude of indications and formulas with quotes for the same routes, sometimes the quotes are vastly different with little to no apparent explanation.  The ports chosen, length of review period for bunker prices, fuels used as a reference and capacity utilization may vary significantly.

There can also be emergency and low sulfur surcharges (EFS) added to the BAFs, all being on top of the general freight element.

In contrast, PCBs allow industry players to factor fuel costs into freight contracts easily. Providing daily transparent updates, allows for a robust means of tracking fuel cost fluctuations.

PCB calculations are broken down to reflect the actual use of each fuel, depending on distances traveled, by feeding daily Platts bunker prices including 0.5% marine fuels and marine gasoil into transparent bunker charge formulas.  Th final product is a daily $/FEU bunker charge number for each of the key trade lanes, both headhaul and backhaul, based on standardized and transparent formulas which are visible to all associated parties.

Platts Time Charter Equivalent (TCE) assessments for tanker freight reflect the net daily revenue of vessels operating on key dirty tanker routes in the European shipping market.

TCE’s provide daily assessments expressed in $/day.  They provide dual TCEs reflecting scrubber and non-scrubber tonnage.  They reflect bunkering patterns by publishing three assessments for each TCE (using daily bunker costs; based on bunker costs one week prior; and based on bunker costs two weeks prior).

As of June 1, 2022, S&P Global Commodity Insights amended Capesize Port Hedland to Quingdao route Time Charter Equivalent (TCE) Calculations, removing the additional waiting days that were needed to meet Australia’s COVID-19 quarantine regulations.

On March 22, 2022 a circular from Pilbara Ports Authority allowed vessels to berth earlier than 14 days at Port Hedland subject to certain COVID-19 testing protocols.

The TCE calculations were amended on Nov 2, 2020 to allow for completion of the 14 day quarantines from the ballast port Quingdao, North China, before they would allow the vessel to berth in Port Hedland, Western Australia.  The market feedback is that most Capesize shipowners have since adjusted their operations back to typical standards that were in place before the onset of the pandemic.

The affected assessments include:

The May 26 price for Delivered Cartagena marine fuel 0.5% S (of bunkers has also been corrected.  The corrected assessment:

Assessment Symbol Corrected Price ($/mt)

DLVD Cartagena 0.5%S MFCRD00 $1,095.00

These assessments appear in Dry Freight Wire, Platts Shipping Alert pages 612, 613, 614 and 615, as well as Platts Tanker Alert pages 3970, 3971, 3972 and 3973 and in the Platts price database under the codes above.

In Summary

The amended TCE calculations and corrected price assessment could potentially mean better delivery and reduced shipping costs for overseas transport of commodities such as steel.

Source: 

S&P Commodity Insights Email Alert
https://www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-methodology/methodology-specifications/global_freight.pdf

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