Who is?

Hi. I am a shipping company director, transport academic, author, family man and all round nice guy. I have worked as shipbroker, shipowner, freight trader and bulk charterer, in senior positions, with some of the largest and most disrespected (joke) companies in the world. Ask my advice on all things shipping and you will receive my blunt and always honest answer. Hang around to learn more about chartering and ship broker salaries, chartering and ship broker jobs, chartering and shipbroker recruitment agencies, cheap freight, maritime education, chartering and ship broker qualifications, become a ship broker, tips on how to be a successful bulk shipping executive, philosophy, Zen and the art of shipbroking, and much more. Yours The Virtual Shipbroker (recently proclaimed the guru of shipbroking) Copyright © 2009-14 by Virtualshipbroker

Saturday, April 25, 2009

Shipbroker commissions.

I have written previously about shipbroker commissions, especially for dry cargo specialists.

Shipbokers usually earn 1.25 percent of the total freight bill. So if 50,000 mt of steels from the black sea to china gets fixed at usd 35 per tonne the total freight bill = usd 1.75 million. 1.25 percent of 1.75 mill = usd 21,875 dollars in commission to the broker.

So the next question is how much does the average shipbroker earn for his / her company in a year?

Its very difficult to be specific because of the diverse nature of the industry and its particpants. A perfectly good broker in a small market segement may earn USD 150,000 for his firm over a 12 month period. In a more liquid segement of the market an average broker may earn 150,000 for his firm.

But I am prepared to make a few generalisations - why - because I can!

Here is what I think are the benchmarks for brokers in your major, liquid markets. For all those brokers out there who beg to differ send feel free to send me an email.

Young / junior / break even broker - generate bwteen usd 75,000 and 175,000 per year in revenues for the company.

Medium performer - generate between USD 175,000 and 350,000 per year.

Good performer - Genrate between USD 350 and 600,000 per year.

Star (fixing machine) - USD 600,000 plus!

Want to work out how much each shipbroker should be getting paid? For many years there was an unwitten rule. Take the brokers revenue and divide by three. This should roughly equate to the shipbrokers salary and commissions at the end of each financial year.

BTW - I am busy trying to write 'how to start your own shipbroking business'. Should be available over the next one or two weeks'. For those of you interested on starting a shipbroking business there are a few revelations in their that i am sure you will more than interesting.

So keep an eye out!

Yours
VS

53 comments:

  1. Without a doubt those figures are a great incentive to study the course materials :)

    I find very interesting what you say about comissions because in the books you can know about comissions earned by a broker but not about what part of that is for you if you work as an employee.

    Best regards,

    David

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  2. Hi David

    Thats why this blog and my books are called 'insiders guides'!

    Im gald the information helped

    Yours
    VS

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  3. Hi,
    Great blog, I have just left the army as a captain and very interesetd about ship broking and finding out more. How would I go about breaking into the industry and getting a foot in the door so to speak. I am meeting a shipbroker today to find out more but would be interested to hear your thoughts on recruitment and if you had any useful people to talk to.

    ReplyDelete
  4. Hi There

    It seems like you have some good experience and doing all the right things. Hopefully your shipbroking contact can help. The questions you ask are the same that quite a few others have asked and the answers are wide varied. Hence the reason i wrote 'Inside Shipbroking'. The book gives one all the insight they need in order to try and get a foot in the door.

    Good luck

    Yours
    VS

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  5. Hi there

    Can you name some good firms one could apply to in singapore ??
    I have worked in Shipping operations before in a huge container shipping company.

    tks
    Agr

    ReplyDelete
  6. Hi AGR

    There are plenty of great firms in Singapore. You need to do some research for yourself. Check out the Singapore shipbrokers association for leads.

    ReplyDelete
  7. Hi VS,

    I have seen the 1.25% commission for deep sea fixtures. Also have seen this same commission earned not only on freight but also on demurrage. Is there an unwritten rule about this? How do you recommend this issue to be included in negotions? at what stage?

    Thanks for your help!

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  8. Awesome question Alex

    Many brokers and cvharterers (adcom) do not realise that they have every right to charge commission on not only freight but allso on deadfrieght and demurrage.

    When I add my 1.25 percent to any negotiation quote i always stipulate "1.25 percent on freight, deadfreight an demurrage".

    Should be included at the very start of any offer or counter offer - not necessarily in the quotation though!.

    Good luck !

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  9. Crystal clear!!!

    Thanks much VS!

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  10. good aft VS! thanks yr reply reg period of brokerage payment. Have however next question, born from alive practise.. Vessel performed bulk grain shipment from black sea to ec india(kolkata). upon fixture has been agreed(and stipulated in CP in written) that chtr's broker will collect his brokerage from ows. when vsl sailed, broker faced his invoice to ows. during passage, chtrs changed dport from kolkata to chittagong and agreed with ows(against addtl amount) to change dport..transit time was arnd 25-27 days, and broker few times approached ows to remit his comm, but ows replied tht they will pay afer ''shipment will be completed''. disch took longer time than was agreed as per CP, and vsl fallen into demurrage(arnd usd 60,000), which is still under dispute/discussion.Already 5 month gone after fixture and 2 months gone after completion of discharging. When broker approached ows again(after completion of disch, with no shortage), ows advised tht they will not pay brokerage again, whilst ''all financial outstanding debts will be settled, including demurrage". Question: are they right to avoid brokerage payment in this case?? Why broker should be ''hostage'' in this situation??

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  11. The owners might be in breach of the Charter Party in this case.
    Is it common practice, that any comissions to any 3rd party, brokerage, adcom to be paid only if the initial freight invoice is being paid. Of course, any demurrages at loading and/or discharging port, usually are being paid upon issuance of the statement of account (which is issued immediately after the vessel completed discharging).

    If we are talking grain, the widely used Charter Party form is Gencon '94 or inhouse revised ones such as Synacomex or Euromed.

    Is it common sense that the broker to do all in his power to settle any dispute between owners and head charterers (or contractual parties), unless he is not acting in 'bona fide'. Unless one of the parties are breaching the CP in which this case the courts are settling the disputed amounts, usually the broker should be able to receive his comission nevertheless.


    Jebus K.

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  12. Nice one Jebus - Welcome aboard!

    VS

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  13. Since its my first post here, congratulations for the interesting blog. One question none did.
    I am about to start in an office, no salary in the start.(yes, it happens too, not always rosey). My future boss suggested that my bonus will be 10% on commissions from fixtures i deal. He said that this is the bonus percent in the market but i couldnt crosscheck it. Could you answer what is the basic bonus or how it is calculated in general, not for experienced pros that can negotiate it.
    thanks in advance,
    best wishes to your blog

    ReplyDelete
  14. Be very careful. Yoru boss could be a crook. If you have no experience whatsoever then how will you do any deals? It could take you 2 years to put a deal together so how will you live.

    If it is commission only - then 10 percent is terrible. Commission only should be 50 percent.

    If i was you I would negotiate a minimum wage because dont expect any income for atelast 1 maybe 2 years!

    If you do not take the job - drop me a line with the name of the company involved please! Taking advantage of people will only give the industry a bad name!

    Yours
    VS

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  15. thank you very much for the answer.
    The office i mentioned is a competitive brokering one. i have an educational background in shipping plus few experience. if the office has good clientele, although new, i might succeed a fixture some-when. Is really 50% of the commission passed to the employee that dealt the fixture? That would be dreamy. I am in Greece, and squeezing juniors if ever hire one is tradition. But with a 10% from handys you cant make a living unless you represent many fleets or cargoes of course.

    keep up this good blog

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  16. Hi

    No 50 percent commission is not normal but neither is commission only.

    If the office has good clientel the problem you will have is that the current brokers will not let you near the good clients. Especially if they too are earning commission.

    C'mon you Greeks pick up your game. if you cant afford people then dont hire them. if you can then pay them properly!

    Greece may be in some financial trouble but the shipping sector isnt!

    Yours
    VS

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  17. Hi VS, something which is puzzling me, as post states "1.25 percent of the total freight bill" what exactly comprises of total freight bill? Additional port and berth charge are commissionable?
    This is a great blog!

    ReplyDelete
  18. Hello VS! I consider myself an experienced tanker broker (15 yrs experience). We run a small brokers shop and conclude business with various charterers and many ship owners mainly in Europe. We normally charge 2,50% brok. commission on vessels less than 20.000 dwt (a usual practice among european brokers) and 1,25% on vessels above 20k size. Recently we run into argument with one of our clients - a ship owner, whose new management have established for themselves that broker can be entitled to max 1,25% brokerage regardless whatever is the size of the vessel and whatever is the business.

    I'm wondering what is your opinion on this issue?
    Thank you!

    ReplyDelete
  19. Hi VS ,

    Pls note self is a sailing Master of vsl who now wish to enter as Ship Broker. I am well known to some ship owners at Bangladesh who procure scrap ships for demolition.Pls guide how can I enter in this field and find good scrap ship deals for owners and what is usually the brokers commisiion in such deals.
    Thanks for ur advice in advance.
    AKaY

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  20. Hello Akay - have yu read 'inside shipbroking' that is the best place to start your search.

    Best of luck
    VS

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  21. Hi VS,

    I think those revenue figures you note seem a little low to me. Obviously I realize they will depend on market/vessel-type, time vs. voyage vs. project vs. S&P, and I realize your background is on the dry-side, but when I worked for a tanker brokerage, even "average"/good brokers were expected to bring in revenues in the millions, not hundreds of thousands. Using today's rates, if a broker were to a fix a time-charter for one-year, say an Aframax tanker, at $35k/d that is $160k in revenue to the firm (assuming 1.25% comm.) from that single deal. Figure a time-charter or two a month, plus some voyage charters, and you start to see where revenues (not to mention paychecks) can approach or exceed 7 figures. Was my experience unique or unprecedented? I didn't think so at the time. I was just a wee-analyst at that time and I've since moved on into operations, so I'm a bit detaching from broking nowadays, though I'm well aware of today's reduced hire/freight rates, particularly relative to several years ago.

    What's your take?

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  22. What is a typical commission for an S+P transaction?

    ReplyDelete
  23. I am new in the sale and purchase business. I am trying to broker the sale of an oil tanker for a buyer. The sellers have their broker as well who i am discussing the transaction with on behalf of owners. Being new in the business, can someone clarify for me what commission applies in this case. As the buyers broker, who is going to pay my commission or are my going to share from the commission from the sellers broker?

    ReplyDelete
  24. VS, is it true that tanker brokers earn more than dry bulk brokers? thanks in advance.

    ReplyDelete
  25. the virtual shipbrokerDecember 17, 2011 at 12:25 PM

    Howdy - no on average the salaries would be very similar

    cheers

    ReplyDelete
  26. Hi VS, I am a shipbroker focusing mainly on COA deals. Which means owner or his broker quote me a FIOS rate and I add my margin to it before quoting to the buyer/charterer. Will the owners have any objection on the percentage of my margin. Can they refuse to pay my commission if they feel it is high. How do I safeguard my commission.

    ReplyDelete
  27. SK

    If a shipowner agrees to the commission rate in the charterparty then yes he must pay! The problem you will have is BEFORE you fix. If you aks for a very high commission on a coa the shipowner has every right to ask you why? The standard is 1.25 pct. There is very little justification for charging more.

    cheers / vs

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  28. Hi VS!

    I am a ex-Marine Maint. Manager n hv faced problems due to Spondylitis I have to stop active shipping jobs. I was advised to go for Desk jobs like Freight broking n S+P. I have some contacts in Breakers as well. I am trying to explore the line. I have been a manager in various shipping companies n most of the tech terms I am familiar with. I have one question. In a chain of brokers how the brokerage is to be distributed? Secondly, when I receive an offer from a sub-broker or another broker for cargo or sale of vsl how the commission is divided between the two sides? What are the going rates of commission n adcom for various deals?

    Tks

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  29. hi VS,
    does the figures above include bonuses? thanks.

    ReplyDelete
  30. Hi there

    shipowners pay commission so the broker invoices the shipowner.

    Standard charter commissions are 1.25 pct for brokers and snp commish is 1 pct..

    good luck!

    ReplyDelete
  31. Hi VS ...

    I thing it's very interesting job. But I would ask you, how much percent for bunker broker? it's same or higher?

    There is a rule for that?

    Thanks

    ReplyDelete
  32. i think its 50 cents or 1 buck per tonne...any bunker brokers reading can elaborate?

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  33. Hi VS... excellent blog

    I want to confirm whether the ship broker should gets his commission only from the ship owners or from cargo owners as well.. pls clarify

    ReplyDelete
  34. Hi

    Shipowners pay commission. It is the shipowners cost..

    BUT you can ask charterers to deduct the commission from hire payment (payment they make to shipowners) and the chargterers remit the funds to the broker instead...

    does this make sense?

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  35. Hi VS... thank you so much for your reply. I'm a master mariner,and i have my relative working for a cargo owner. They wanted to hire a ship for their goods and I helped them to find a ship owner. The ship owner promised me a 1.25% commission because I'm the middle man. Do I call myself as a ship broker??? Should i open a new company????? What are the risks involved as a ship broker. I'm doing this to this help my relative and I don't want to get into trouble.

    ReplyDelete
  36. Congratulations on finding yourself in the middle of a lucrative deal. And yes you got it....you are now a shipbroker!

    First point of call. Buy my books...all 3 - im not kidding. And then once you have read them then we can talk. Shipbroking is lucrative but risky especially if you dont understand what you are doing. I consult many companies exactly like what you may be able to start now, and help them (at very little cost) create amazing business's. Well done, good luck and keep in touch!

    VS

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  37. Dear sir
    i m new in part time tug boat shipbroker ,if i recommend buyer to ship owner ,but i don,t have my company .how to comfirm i get my commision ? is that sign vessel brokerage agreement ??

    ReplyDelete
  38. You need to have a company - otherwise you have no legal standing. The parties could just argue that what you provided was merely a firendly recommendation.

    If I tell my brother he should buy a certain house should he give me a commission? No...If i am a qualified realtor...and i negotiate the deal then that is a different story.

    I have never signed a shipbroking agreement other than the charterparty that has been used. Get your name on the actual sales contract and you could have a case!

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  39. Dear sir
    Thanks for reply ,i just involve in bu and sales not cha chatered .if i have buyer and i also have find tugboat owner ,then how can i do nex step ? can 1 asking any letter or agreement from ship owner regarding my commision ?? i m new , if i wan to involve in this business ,what should i do ? any good suggestion ?

    thanks& regards
    j

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  40. sir
    can i know what means letter of intent ? when i wan bring buyer to inspect tugboat .LOI is request from ship owner 's broker . do u have any sample ? if got kindly send to andy192837@yahoo.com.my .thanks and have a nice day .

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  41. Dear Sir

    I am dealing with a vessel sellers broker agent and they have quoted as below
    "for a vessel of 7500 MT LDT and owners expecting usd 410-415 LDT WITH 2 PCT ADDCOM PLUS 2 PCT BROKERAGE COMMISSION FOR US"

    Can you please clarify what is ADDCOM and brokerage commission and how much commission I can get being a buyers broker agent and is it 410-415 what sellers quoting is including the Addcom and brokerage.

    ReplyDelete
  42. VS,
    Thanks for the advice I really appreciate your blog. I am a ship broker based in Nigeria and commisions were a problem for me cos I didn't know the rates to fix. but now i know and i will keep in regular touch with your blog.
    Regards,
    Anthony

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  43. Hey guys check out shipbroker fast track and my blog for explanations re commissiomns - its all there!

    Anthony - appreciate the sentiment - thanks for stopping by!

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  44. hi! is there any sample of invoice which is to be generated towards owners by the brokers for time charter income.
    Thanks

    ReplyDelete
  45. No

    Its fairly simple - just use your letter head and send them an invoice for your commission. You can send them an invoice as often as they invoice the charterers which is usually every 15 days.

    cheers
    vs

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  46. Hi, I am a shipbroker based in the Philippines. I am actually an old timer in shipbroking, but more of an snp shipbroker than a chartering broker. I am not an expert in chartering problems.

    I am having a problem deciding whether a situation my shipowners are in is a case of deadfreight or a breach of contract.

    It is said that when the charterer advises the shipowner that he cannot load any cargo
    on the vessel, this becomes a breach of contract and not deadfreight because the shipowners can still mitigate his losses by finding a substitute cargo.

    But what if the vessel has waited at the load port for more than 30 days (laytime agreed is only 5 days and a complete voyage would only be 15 days), shouldn't that
    be considered deadfreight because the time lost is already equivalent to more than one voyage. In other words, the ship owner does not have any time to mitigate his losses.

    Would appreciate your comments.

    This will help me determine how much brokers commissions I deserve to get. If it is deadfreight,
    I believe I should get 100% but if it is a breach of contract, according to clause 15 of gencon, I can only collect 30% from the party at fault.

    More power to you!

    Bobby

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  47. Hi Bobby

    Awesome letter - I have replied with your very own post..

    http://virtualshipbroker.blogspot.com.au/2013/07/a-question-from-reader.html

    ReplyDelete
  48. My name is Afolabi from Nigeria. I am a prospective ship broker with interests in S&P of used vessels, particularly dive support vessels; am also interested in tanker brokerage, bunker brokerage,tug boat, dry weight and barges brokerage.I don't think I should narrow down my choice for now as a prospective newbie.What do you think moderator? What are the best marketting strategies that has worked for you? Can I start by just going to drop proposals or with just internet presence ,as the only contact with maritime was just a PGD....Thanks for sharing what you know; u deserve a heart of gold,lol!

    ReplyDelete
  49. In the current internet world, ship brokering is becoming tough. Owners and Charterers are able to do their link directly very often with ship broker's information. What is the best strategy for ship brokers to prevent 'by-passing' and thus making ship broker business relevant.

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  50. Is brokering fees/ commision on a case by case basis, or can one agree a specific %

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  51. hello Virtual Shipbroker what about the sale and purchase commission? is there any fixed rate?

    ReplyDelete