Worldscale
Kristian R. Fuglesang
Assistant Director, INTERTANKO
WMU – 4th April 2011
Anti-Trust/Competition Law
Compliance Statement
INTERTANKO’s policy is to be firmly committed to maintaining a fair and
competitive environment in the world tanker trade, and to adhering to all
applicable laws which regulate INTERTANKO’s and its members’ activities in
these markets. These laws include the anti-trust/competition laws which the
United States, the European Union and many nations of the world have
adopted to preserve the free enterprise system, promote competition and
protect the public from monopolistic and other restrictive trade practices.
INTERTANKO’s activities will be conducted in compliance with its Antitrust/Competition Law Guidelines.
Worldscale – 4th April 2011, WMU
Purpose of Worldscale:
• To enable a tanker to obtain the same net
return per day at the same WS percentage
regardless of the voyage actually
undertaken.
Worldscale – 4th April 2011, WMU
Purpose of this lecture:
• To outline what Worldscale is
• To outline what Worldscale is not
• Show by example how Worldscale is used
Worldscale – 4th April 2011, WMU
Why use a freight scale?
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Standard of reference
Facilitates competition
Ease of conducting business
Geographical options included
Applies to different liquid cargo types
Faster response to quotations
Worldscale – 4th April 2011, WMU
Why use a freight scale? (ctd.)
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Standardised format
Market Index System
Common understanding of terminology
Financial risk reduction
Simplification of invoicing
Worldscale – 4th April 2011, WMU
Freight Scales – History
• Originally, tanker fixtures had several pages
of freight rates covering a large number of
optional ports.
• Concept of freight scales developed by UK
and US government during World War II
• i.e. about 70 years ago
• Abiding principle that Owners should receive
the same net daily revenue irrespective of
voyage performed
• Subsequently further refined
Worldscale – 4th April 2011, WMU
Structure of Worldscale
• Based around nominal trading voyages of a
notional standard vessel
• Definitions of terms used, assumptions
made and any specific applications
• Calculations based on the costs involved in
the Standard Vessel performing a round
voyage on the target voyage
Worldscale – 4th April 2011, WMU
Structure of Worldscale (ctd.)
• Structured to give the same net daily returns
for the standard vessel regardless of voyage
performed at 100% of the nominal flat rate
Worldscale – 4th April 2011, WMU
• Produced by two non-profit making
organisations aiming at independence from
external bias and narrow market views
– Financed through subscription
– Subscribers have no formal authority, can only
vote with their feet
Worldscale – 4th April 2011, WMU
Worldscale schedule issued jointly:
• Worldscale Association (London) Limited
• Worldscale Association (NYC) Inc
• New York responsible for North, Central and
South America, Caribbean Islands,
Bermuda, Greenland and Hawaii
• London responsible for the rest of the world
Worldscale – 4th April 2011, WMU
Worldscale Association (London) Limited
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Simpson, Spence & Young Limited
H. Clarkson & Company Limited
Galbraith’s Limited
E.A. Gibson Shipbrokers Limited
Braemar Seascope Limited
ACM Shipping Limited
Worldscale – 4th April 2011, WMU
Worldscale (NYC) Inc
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McQuilling Brokerage Partners Inc
Mallory Jones Flynch & Associates Inc
Odin Marine
Poten & Partners
Charles R. Weber Company
Dietz & Associates Inc
Worldscale – 4th April 2011, WMU
Worldscale – Basics 1
• Constitute an Index of Reference Rates with
common calculation factors
• Expressed in USD per tonne of cargo carried
• WS Schedule issued yearly in January, amended
for changes to bunker prices, port charges and
exchange rates
• Printed WS book contains 73,000 rates and website has over 500,000 rates
• Further rates available from the Associations
• Available on annual subscription basis only
Worldscale – 4th April 2011, WMU
Worldscale – Basics 2
• Amendments published when significant
changes occur to port charges and are
effective from a specified date
• Actual market rates are expressed as a
percentage of the published rates e.g:
W 100 = the “flat rate” as calculated and published
W 40 = 40% of the published rate
W 250 = 250% of published rate
• Market rates are determined by negotiations
between the owner and charterer
Worldscale – 4th April 2011, WMU
Basis of Calculation
• Standard vessel:
– Total capacity 75000
– Speed 14.5 knots
– Bunker consumption:
• 55t/d at sea; plus 100t/voyage, 5 t/d in port
– Port time 48 hours per port for one to one
voyages plus 12 hours for additional port(s)
– Fixed hire element USD 12,000 per day
Worldscale – 4th April 2011, WMU
Basis of Calculation ctd.
• Variable costs
– Bunker prices: Worldwide average for 380 cst
during the 12 months ending 30 September
prior to Schedule effective date
– Port costs: Information available up to endSeptember using USD exchange rates average
for during the 12 months ending 30 September
prior to Schedule effective date
– Canal Transits:
• 24 hours for each Panama Canal transit
• 30 hours for each Suez Canal transit
Worldscale – 4th April 2011, WMU
Worldscale Schedule Sections – 1
• Explanatory Notes (Preamble Part A):
– Definitions,
– General explanations,
– Basis of calculations,
– Route policy/distances
– Assessment of port costs
– Revision policy
– Trans-shipment areas
Worldscale – 4th April 2011, WMU
Worldscale Schedule Sections – 2
• Terms and Conditions (Preamble Part B):
– Effective date (commencement of loading)
– Laytime allowance
– Port and Terminal Combinations
– Charterers’ account items
• Table of demurrage rates (Preamble Part C)
• List of ports (Preamble Part D)
– Alphabetically by port and country,
– Trans-shipment areas
Worldscale – 4th April 2011, WMU
Worldscale Schedule Sections – 3
• Fixed differentials (not subject to percentage
variations agreed)
– ECAs
– Canal Transit Dues
– High cost items based on vessel/cargo size
– USA: Additional premiums for coverage of Oil
Pollution Liability Insurance on vessels carrying
persistent oil to and from the USA
Worldscale – 4th April 2011, WMU
Worldscale Schedule Sections – 4
• Variable differentials (subject to percentage
variations agreed)
– Allows different cost berths in same port
– Arabian Gulf, Black Sea and Lake Maracaibo
Rates ‘additions’ for major loading areas allows
combinations to give many more rates in book
format
Worldscale – 4th April 2011, WMU
Worldscale Schedule Sections – 4
• Schedule of Flat Rates (W100 rates)
the basic part of the calculated rates
Worldscale – 4th April 2011, WMU
Extraction of a flat rate for a voyage
• Check relevant year
• Check if Arabian Gulf, Black Sea or Lake
Maracaibo loading port
• Extract flat rates
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Additions if required
Main rate part for addition
Add two parts or use Direct rate
Note any references to ‘D’ pages
Calculate any fixed differential
Apply any Charterers’ Account items
Check for circulars that apply
If in doubt, contact nearest Worldscale office
Worldscale – 4th April 2011, WMU
Worldscale details
• Worldscale is no panacea.
• Essential to know limitations
• What does the Worldscale system not do?
– Impossible to give a comprehensive list, instead
some examples:
• Does not protect from variations in bunker prices and
exchange rates
• Port costs assessed for the Standard Vessel – your
vessel may be of totally different size, requiring
different number of tugs etc.
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• Routeing based on most economic route for
Standard Vessel
– Larger ship may have to take longer route
– Winter storms not taken into account
– IMO, littoral state regulations and published
official recommendations for environmentally
sensitive routeing taken into account
– WS Associations will provide other relevant
rates on request:
• Their use is dependent on agreement between the
parties
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• Retroactive port costs not reflected
• New port charges not yet reflected (e.g.
incurred after commencement of loading)
• Exposure to time-based port charges
(remember 48 hours basis)
• US Certificates of Financial Responsibility
(COFRs)
• Seasonally incurred costs not reflected
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• Heating of cargo not reflected
• Shifting costs not reflected
• Slop disposal and ballast reception costs not
reflected
• Only known Security costs are reflected
• No allowance for Tax on Freight or Income
• No allowance for insurance
• No allowance for deviation (e.g. bunker
stops, unstable situations)
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• No allowance for effect of load line
regulations on cargo capacity
• WS silent on cargo quantity on which freight
is to be calculated
– Ensure clear charterparty clause, e.g. reference
to Bill of Lading quantity
• Inert Gas and Crude Oil Washing not
reflected – for Charterparty
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• Short voyages – weakest aspect – calculate!
• Multiple voyages (e.g. COAs)
– consider appropriate currency and bunker
adjustment clauses
• Rotation of ports
Worldscale – 4th April 2011, WMU
Do not mix lumpsum and
Worldscale!!
Worldscale – 4th April 2011, WMU
• New demurrage table in WS 2011, examples
$/day
dwt ranges
380 cst rates
0.1% Sulphur
rates
40,000/ 44,999
9,000
9,750
60,000/ 69,999
15,000
17,500
100,000/109,999
27,000
30,750
140,000/149,999
39,000
48,000
300,000/324,999
87,500
109,500
NB (1)
In calculating these demurrage rates an allowance has been made for one day's
consumption of bunkers in port with engines at standby.
NB (2)
No allowance is made in the demurrage rates for port costs incurred when the vessel is
on demurrage, nor is any allowance made for the cost of cargo heating when on demurrage.
Worldscale – 4th April 2011, WMU
Worldscale details ctd.
• Interpretation:
– Solely the concern of the contracting parties –
not the Worldscale Associations.
• INTERANKO has often given advice
• Departure from Standard terms permitted
– Remember to specify in charter party!
• Vagueness of terms (e.g. port range)
Worldscale – 4th April 2011, WMU
Worldscale – 4th April 2011, WMU
Thank you for your attention
www.intertanko.com