Tim Jones, president of French shipbroking house Barry Rogliano Salles (BRS), has questioned the role of shipbrokers’ input into the revamped Baltic Exchange.
Writing a foreword to BRS’s 120-page annual shipping markets outlook, Jones discussed how the Baltic indices, now owned by the Singapore Exchange (SGX), have changed in the past couple of years.
Jones reckoned the indices now reflect less and less shipbrokers’ objective opinion of the state of the market, but rather more what clients are showing to the market.
SGX has made a number of changes at the Baltic since taking it over at the end of 2016, which in turn has seen at least two rival dry bulk indices launched this year.
Jones, who next month celebrates 38 years at BRS, also used his foreword to look at how the big end users in dry bulk trades were increasingly taking control of the sector.
Direct fixing using indices is now the majority of dry bulk transactions, he stated. On the major ore routes, which represent over 50% of the dry cargo market, BRS estimates less than 10% is fixed through brokers or disclosed. The CIF (Cost, Insurance and Freight) net back prices of commodities are even more dependent on the indices.
“Price disclosure that used to be done by establishing bids and offers on the market is no longer necessary as the indices serve as price references. End users can now price their freight (and the landed cost of their commodity) on their own ships without going to the market,” Jones wrote, adding: “ Could this be the reason why a majority of the dry cargo orderbook in 2017 constituted orders by, or for, end users and traders? Traditional owners are having a harder and harder time justifying investing against returns based on purely indices.”
Jones concluded by warning that dry bulk was potentially headed to an “uneven playing field” where the giants are able to control the total commodity chain.