Panos Patsadas, managing director at Target Maritime Transport, argues his profession is just as relevant and important in the digital era.
The frenzy following BHP’s decision to use an online bidding platform and to cut out the brokers has raised one important question regarding the future of shipbrokers. I couldn’t help but wonder if the question has come up due to the weight BHP has on the supply side, or due to the publicity this move has been given. I personally feel that publicity has more to do with it than anything else. Any argument that such a move by BHP has anything to do with do with costs is misleading. In most cases it is anyway paid by the owners.
The use of bidding platforms by multinational companies is nothing new. EPCs have been using it for years, but no one ever spoke of the end of shipbrokers in MPP/ heavylift shipping. About one year ago, CSN, the public steel production company of Brazil also tried to introduce a bidding platform, although it never made the headlines, neither did it lead to cutting out of the middleman. A middleman can be authorised or registered to submit a bid on behalf of the principal in the same way as a shipmanagement company is authorised to act on behalf of the owner. In fact, the more paperwork and administration is created in the dealing process, the more likely an owner, particularly a traditional one, is likely to delegate same of it to a trusted middleman. In times, when there is little cargo moving, it may actually give shipbrokers unglamorous yet much needed work to justify their existence. Practicality and streamlining has less to do with the use of bidding platforms than transparency does. Backhanders and under the table money is unfortunately still part of unsound shipbroking practice, and the bigger the accounts and volumes involved, the likelier the existence of such incidents. Take Petrobras, Korean yards, offshore companies – corruption incidents are becoming a regular phenomenon these days.
There is really nothing unnatural about BHP’s move to use such a platform nor should it come as a shock. The use of a platform however, even by a company as big as BHP, does not replace the core function of a broker which is to facilitate deal-making. It is all about transparency and counterparty risk. Anyone who has submitted a bid through a platform knows that first you need to register as a vendor, which involves a massive load of documentation needing submission, and only then can you bid through this platform. How many small to mid-sized owners will be willing to disclose their financial standing in this market is another story. Why not have your trusted broker registered and have them vouch for you?
Last but not least. Let’s take the bulk market. The hire gap between owner and charterer can be as high as $2,000 – 2,500 a day. So let’s assume the owner and charterer talk directly to one another, and they have not had previous dealings which could make the process smoother. The owner of a supramax will ask $13,500 a day for a fronthaul on a supramax, the charterer will only want to pay $11,000 a day. And that will be the end of it. No deal! Everyone will tell you there is a deal to be made around $12,000 -12,500, but without a broker in-between to ‘manage the gap’ this dialogue can be very short.
The implication of using platforms, in my opinion, is that it will give an advantage to owners with existing C/Ps over new entrants. In other words, although in theory it will be open to anyone who is willing to comply with the requirements, it will narrow down the number of counterparties BHP or any other BHP is effectively willing to do business with. It is not random that BHP, Rio Tinto, and other conglomerates use panel brokers. The platform is just the formalisation of something that has already been taking place for years. So it hardly marks the end of shipbrokers. The spot market is the most practical, time sensitive, and least administrative part of the shipping business, and the fact that after a hundred years, business is still done over the phone, shows that the interpersonal factor has strong foundations and resilience over computerisation. There is only a handful of BHPs but thousands of owners out there. So the question is who will change their ways first. I personally doubt it will be the owners, but then again shipping may surprise us all once again.