London: The weak dry cargo shipping market is threatening the earnings of smaller shipbroking companies, which are growing increasingly concerned that their payments may not be honoured by the increasing number of distressed shipowners.
Market sources tell Splash that broking firms are bracing themselves to take a hit as dry cargo vessels continue to fix at rates below their daily operating expenditure.
Today the Baltic Dry Index fell to 516 points, the fifth consecutive trading day that the index has fallen to a new all-time low.
“Whoever is at the bottom of the food chain will always be the last to get paid,” the head of a small dry cargo broking house told Splash today.
Small broking shops will always be vulnerable, “and the larger listed companies don’t want to carry around all that bad debt,” he said.
These sentiments were echoed by the director of another small London-based shop, which trades in both tankers and dry cargo. Timely payments have improved from tanker owners as the market has firmed, he told Splash, but now bulker owners have become the problem.
Shipowners who are in financial difficulties will quickly find themselves sidelined in the market as word gets round, he said.
A senior shipbroker at a major privately owned shop told Splash that companies such as his were not under threat because any loss of earnings of their dry cargo department would be shored up by the other departments.
Under English law, which governs the majority of the world’s charterparties, the broker’s right to commission is protected via the Contracts (Rights of Third Parties) Act 1999.