Shipowners and brokers go knuckle to knuckle

The role of the shipbroker was hotly contested at today’s TradeWinds Shipowners Forum, most vociferously by Euronav’s CEO Paddy Rodgers, who made brokers’ blood boil by blaming plummeting spot rates on brokers’ impatience to make their commission.

“The tanker business is essentially a spot business and, because of the way the spot market works for tankers, we trade our services to ships as a single commodity, and every time we lift a cargo at a particular time and place, we’re in an auction,” Rodgers told delegates at the event at Posidonia in Athens.

“The cheapest ship wins the auction, and the broker who brings the cheapest ship wins the auction and gets the commission. It’s in the broker’s interest to constantly talk the market down, that’s just natural. What it’s caused is a total asymmetry of knowledge. It means that the cargo interest gets all the information a broker has and the shipowner gets very limited information,” he went on.

“The purpose of pooling, when we set up the TI Pool in 1999, was that we got together for one reason and one reason only: let’s get together enough size to be in the market every day and every broker has to approach us every day. If we have enough information, we can balance the market and the asymmetry of information.”

TI chose to launch its VLCC app to disseminate fixture information and make sure that “the whole market gets smarter”, Rodgers said, which has allowed the pool to price freight for tankers at a level that gives a return on capital.

“It’s very difficult [to do the same] in dry cargo because of the timecharter structure and also – the idiocy of all idiocies of any shipowner ever – people fixing their ships on timecharter based on an index payment,” Rodgers said.

“I was quite dismayed at Paddy Rodgers’ comment that all brokers’ soul purpose is to fix at low numbers so they can conclude the deal. That is incorrect,” shipbroker Giuseppe Rosano, founder and director of London-based Alibra Shipping, told Splash on the sidelines of the conference.

“Not all brokers do that and I, working on behalf of Alibra Shipping, can honestly say that we have recommended to owners not to do certain businesses because we felt it wasn’t the right time to fix at certain rates,” said Rosano, who has been a broker for 26 years. His shop, Alibra Shipping, is approaching its 10-year anniversary.

Nevertheless, the industry seems to be trending towards transparency, in which technology will play a part and will add new elements to the role of the shipbroker.

During the forum’s morning session, Klaus Stoltenberg, Deutsche Bank’s global head of ship finance, said banks are mindful of shipping companies’ cash flows and increased transparency will attract capital.

“Client adoption is getting tougher and tougher,” he said. “We need to be able to break through every corporate veil.

“In the aviation industry, there are people over there designing sizeable leasing platforms that are so transparent and strong that they will also attract capital. They were able to obtain ratings from reputable ratings agencies and therefore they were able to tap capital markets and diversify their funding mix,” he went on.

Stoltenberg said he thinks increased transparency, perhaps through the use of a similar platform in shipping, “would be one of the ways to go”.

Ioannis Martinos’ company Signal Maritime, a spin-off from his family’s tanker company Thenamaris, said the spot market works in favour of charterers at the moment. Signal has developed a platform that uses AIS and other market data to build up a system able to predict which vessels are likely to be free for trading soon.

Rosano welcomed this innovation, but ruled out the possibility of technology making shipbrokers obsolete.

“No computer will ever be able to succeed in what shipowners and charterers can achieve with speaking to a broker. Brokers cannot be replaced by computers,” he said.

For one thing, Rosano continued, brokers are able to assist in what can be a sophisticated, nuanced, even political decision-making process, which would be impossible for an algorithm.

“The cheapest ship may not be the right ship for a number of reasons, maybe the owner doesn’t trade with that particular counterparty,” Rosano said.

“In fact, charterers sometimes fix vessels that are more expensive because they give better flexibility,” he continued, adding that charterers also opt to fix vessels at higher rates from owners with whom they have a longstanding relationship.

“Business isn’t solely about numbers, we should get away from this,” said Rosano, emphasising the importance of business relationships built and maintained on trust.

But the human element in shipping markets also extends to “following the herd”, Rosano said, and many decisions are made that would contradict advice turned up by statistical modelling.

“Are you going to say that Mr Angelicoussis or Mrs Frangou or Mr Tsakos wakes up and his research says ‘this is the right business to be in so let’s go and order an aframax?'” Rosano said. “No. Let’s be honest, the shipowner wakes up and finds his biggest competitor has ordered an aframax when he wanted to buy a suezmax, and he’s thought ‘Well, if he’s going to order an aframax, I’ll order an aframax’.

“[Computers] aren’t the be-all and end-all of decision-making because owners to this day still go out and buy ships, secondhand or not, based on their gut feeling at that time and nothing to do with the market – look at S&P activity in the dry market. Many bulk carriers aren’t meeting their breakeven rates,” he continued.

“The more ships you build, the more you have to accept the lower freight rates because you’re adding to excess capacity and not giving the market enough time to recover,” Rosano said.