Worldscale

Worldscale is the pricing language of the tanker charter market. Tankers trade over an enormous number of possible routes between loading and discharging ports, and quoting a separate dollar rate for each would be cumbersome and hard to compare. To solve this, the Worldscale organisation publishes, for a vast catalogue of individual voyages, a nominal freight rate (a flat rate in dollars per tonne) calculated on a standard set of assumptions about a reference vessel, its costs, bunker prices, port charges and canal dues. This nominal rate for a route is known as Worldscale 100, or the Worldscale flat.

In practice, charterers and owners do not negotiate the dollar figure directly; instead they negotiate a percentage of the published flat rate. A fixture agreed at Worldscale 150, written WS 150, means 150 percent of the nominal rate for that route, while WS 75 means 75 percent of it. This lets the market express the strength or weakness of freight demand in a single, comparable number across all routes: when tankers are in high demand, rates are fixed at high Worldscale percentages, and when tonnage is plentiful, percentages fall, sometimes below the point at which owners cover their costs. Because the flat rates are recalculated periodically to reflect changing costs, especially bunker prices, the percentages remain a meaningful measure of relative earnings.

Worldscale is basic to how the tanker business is conducted and analysed. Brokers report the market in Worldscale terms, owners assess the earnings a fixture will produce by converting the agreed percentage into a time-charter-equivalent daily rate, and analysts track Worldscale levels as an indicator of the health of the crude and product tanker markets. It applies specifically to voyage chartering of tankers rather than to dry bulk, which uses different indices. By providing a common, route-by-route baseline, Worldscale turns a bewildering variety of individual voyages into a single, tradable scale of freight value.