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 © 2009-17 by Virtualshipbroker

Wednesday, March 31, 2010

China / OZ Iron ore wars

Thanks to those of you who emailed me that the famous shipping newspaper "Tradewinds" have run with an opinion piece touching on the same subject as my last few posts. This has happened a few times over the last 12 months. Im glad to see that the editors there read my blog.

They could offer me a freelance writing position if they wish! (im sure they have spellcheckers!)

Cheers
VS

Tuesday, March 30, 2010

Rio Tinto / China Scandal

More interesting insights from the webstie 'steelguru'

Good lesson on how things 'are done'.

In other reports It seems that the people paying the bribes are subject to different rules to the rio execs. Mr Du Shuanghua is China's 8th richest man and friends of the very top in Chines Govt! 

Interesting stuff. The world is watching that one for sure.

qte

SMH reported that not all of Rio Tinto's iron ore sales in China were managed through Mr Stern Hu as the ore from one Pilbara operation, Robe River, was channeled through a separate sales team that included Mr Wang Yong, who has been accused of accepting USD 9 million in bribes.


It seems Mr Hu and two staff who reported directly to him, Ge Minqiang and Liu Caikui, have broadly admitted the bribery charges against them. But not Mr Wang, who reported to a different manager.

According to a Shanghai media report yesterday, the only lively portion of this week's Shanghai court proceedings took place when prosecutors read out testimony from Mr Du detailing how he paid a USD 9 million "good deed" fee to a company controlled by Mr Wang in Hong Kong.

Mr Wang explained that he wanted to invest in the Hong Kong stock exchange but could not find a way of getting the money across the border, via his brother's trading company. Mr Wang said he asked Mr Du to lend USD 9 million to his company in Hong Kong, and Mr Du obliged. Mr Wang's brother's company repaid the loan.

It is widely known within the Chinese steel industry that Mr Wang's brother controls a trading company. It is less widely known that one of Mr Wang's key client relationships was with a smart and fearless private entrepreneur called Mr Du Shuanghua. About four years ago Rio Tinto's strategic planners in Australia resolved to allocate a huge new contract of Robe River ore to Mr Du's Rizhao Steel.

Mr Wang's alleged money trail may ultimately show that Rio Tinto's internal governance systems were not as effective as the company's executives had hoped.

Journalists from a number of Chinese newspapers who were gathered outside the court gates were ordered not to publish their stories, according to local media sources. By last night the National Business News story had also been pulled from the internet.

(Sourced from SMH and Business Day)

uqnte


VS

Monday, March 29, 2010

China VS Australia Part 2.

Last year I wrote an editorial about the new cold war beteeen these two - here is the link

Interesting update on this whole issue in the Wall St Journal

Key points - all is not as it seems in the world of commodity trading and shipping. Relationships are key. Corruption is out there under many guises.

The point made was that 'corruption was not why this blew up. It was the breakdown in trust'. Sad but true.

I have spent lots of time in Chinese Steel Industry board rooms staring at a bust of Chairman Mao negotiating iron ore freight deals. Interesting times

Here is the article - very balanced

qte

By HUGO RESTALL


Yesterday a Chinese court sentenced four executives of Australian mining company Rio Tinto to lengthy prison terms for bribery and stealing commercial secrets.

In the eight months since Australian citizen Stern Hu and his Chinese colleagues Wang Yong, Ge Minqiang and Liu Caikui were arrested, we've learned a great deal about the lack of rules not only in China, but also in the global commodities trade. Some of that is China's fault, but hardly all of it.

Foreign media coverage of the arrests and trial has focused on whether the Chinese authorities pursued this case for political reasons. Remember that early last year, cash-starved Rio Tinto angered China by inviting Aluminum Corp. of China, or Chinalco, to take a $19.5 billion equity stake and then backed out of the deal under a combination of shareholder, government and public pressure. Rio was also driving a tough bargain in iron-ore price negotiations with Chinese buyers. Many observers speculated that the four executives were pawns in a high stakes game of tit-for-tat orchestrated from Beijing.

Certainly the timing of the case makes such suspicions inevitable. But the reality is probably more complicated. The Chinese justice system may be manifestly unfair, and once it gains momentum a guilty verdict is a foregone conclusion. Yet Rio itself put forces in motion that led to four men losing their freedom.

It all started with the boom in the global iron-ore market in the early 2000s. That's when China's steel industry embarked on a significant expansion of capacity, turning the trade in ore from a buyer's market to a seller's market. China's large state-owned steelmakers bought at the benchmark price negotiated by Japanese and Korean mills, while smaller firms had to pay the higher spot price. This created an incentive for arbitrage and corruption, but unfortunately both the Chinese government and the mining companies were slow to take account of this in their internal controls.

As demand soared, the benchmark and market prices for iron ore diverged and the system came under increasing stress. In 2008, the Brazilian mining giant Vale negotiated a new benchmark price, only to see its two Australian rivals, BHP Billiton and Rio Tinto, refuse to follow it. Vale reacted by tearing up its agreed benchmark price and renegotiating with producers who were over a barrel.

Then Rio Tinto also began to back out of its contracts, for instance by invoking clauses in contracts to hold back 10% of deliveries, which could then be resold at the spot price. Since Rio was facing a hostile takeover bid from BHP, the company's managers pushed especially hard for every last dollar at the expense of their trading partners to show that they could deliver higher returns for shareholders.

Rio's Mr. Hu himself acknowledged the problem. In 2008, after Rio negotiated a 87% price increase, Australian reporter John Garnaut interviewed him: "He said he had no qualms with driving as hard a bargain as he could on price. But he had misgivings about whether Rio Tinto should risk its integrity in China by claiming 'force majeure' to wriggle out of long-term contracts to chase higher prices elsewhere. 'We acted in accordance with the letter of the contracts, but not the spirit,' he said."

This weakening of the bonds of contract naturally infuriated Chinese steelmakers. So when the economic crisis hit at the end of 2008 and demand for iron ore evaporated, it was payback time. Enjoying a buyer's market again, the Chinese firms simply walked away from contracts.

The turnabout didn't last long. Beijing's fiscal stimulus program quickly revived demand for steel by the middle of 2009, and the Australians were able to start raising prices again. Negotiations over new iron-ore benchmark prices were particularly acrimonious, given the bad blood created over the past couple of years. And that was the state of play when Mr. Hu and his colleagues were arrested on July 5, 2009.

One past participant in the iron-ore business, who insists on anonymity because of the sensitivities on both sides, believes that the investigation into the Rio Tinto executives was ongoing for many months before the arrests, meaning they were not directly related to the Chinalco fiasco or the ongoing price negotiations. The authorities likely started sniffing around as a result of a tip-off from someone on the Chinese side of the industry. The ill will created by the whipsawing prices and huge losses suffered by some firms supplied plenty of motivation for someone to drop the dime on Rio.

And some dirt was found. Rio Tinto has severed its relationship with the executives, saying they engaged in "deplorable behavior," effectively accepting the verdict that they were taking kickbacks from steelmakers to arrange preferential access to iron ore. The charges of stealing commercial secrets are much more murky, as evidenced by the fact that they were heard in a totally sealed courtroom. But these too probably originated from lower down the ladder of officialdom, rather than a Beijing-led witch hunt against Rio Tinto.

The bosses in Australia made the mistake of leaving their Chinese executives in place for too long with too little supervision. But the bigger mistake was destroying the trust of the handshake deals made with Chinese partners in the quest for a little extra margin. That is bad practice anywhere, but especially in China.

Chinalco has not held a grudge against Rio for the failed equity deal. The two companies continue to negotiate joint projects in countries like Mongolia and Guinea. The Chinese government's own post-mortem report on the affair is relatively kind to Rio and admits that the Chinese side could have handled the deal better.

However, the government of Prime Minister Kevin Rudd does not come off so well. Treasurer Wayne Swan ran scared from public perceptions of being too soft on China and politicized the approval process for Chinese investments, making it clear that the Chinalco deal would not go through and future acquisitions in the natural resources industry would face strict limitations. The lack of transparency and hostility toward China came as a complete surprise to Beijing and has created lasting tension between the two countries.

It was bad luck that around the same time, Xinjiang dissident Rebiya Kadeer was invited to Australia and Canberra issued a defense white paper that singled out China as a potential threat around which to base future strategy. From Beijing's perspective these all suggested that Australia was turning hostile and there was no certainty about the rules for Chinese companies doing business there. Had this not happened, it's possible that greater leniency would have been shown to the four Rio Tinto executives.

Everyone doing business in China should be clear by now on the rules—there is no rule of law. Deals can be done on the basis of mutual trust, which creates some level of certainty. The four Rio Tinto executives may be guilty of corruption, but the real reason they are in prison is because that trust broke down.

End Quote

Wednesday, March 24, 2010

Yes my spelling is terrible

Many thanks to Jeffrey Blum the Past Chairman of the London ICS Branch for the private message explaining that my spelling is annoyingly terrible, BUT that luckily I have some interesting things to say.

Nice to see a person held in such high regard is reading my blog.

I take the critisism onboard. (My wife is also on my back about this).

I hereby solemly declare that from now on I will do my best to check my messages before I send them out into cyberspace.

Please note that although the spelling on my blog posts is without doubt woeful, my books are infact checked by a team of spelling enthusiasts from the Oxford University faculty of "Applied Linguistics and Really Good Spelling".

(Wacky crew that they are)

Thanks for reading. And i really do promise to try and watch my spelling from now on.

VS

Sunday, March 21, 2010

Jebsen Family Donation

One of the great shipping families of Norway (and the world) is putting a little back!

The family of Kristian Gerhard Jesbsen in Bergen has set up a charitable fund worth USD 133m Bucks.

Hans Peter jebsens says the fund will focus on Medical and maritime research.

Great Stuff.

Wednesday, March 17, 2010

Perfect entry level jobs in London

Check out these Entry level chartering positions in London.

I think its smart not to necessarily limit yourself to shipbroking positions. Many ways to skin a cat!

After 2 years move across to chartering!

Tuesday, March 16, 2010

Shipowner secrets - Flattery will get you everywhere!

I am doing some consultancy for a raw commodity exporter. They / We ran a tender and I managed to to negotiate the shipowners freight rate down by over usd 5.00 during the course of the negotiation (and saved them around usd 200,000). The cargo was from the Black Sea

The company was flabergasted and asked me how did I know that the shipowner would keep reducing their rates - when from the very start of the negotiation they declared that they could do no better than X amount!

The key here is that I was a Shipowner for many years so I know how they think!

Many charterers and brokers fall into the trap of thinking that shipowners have fixed costs and cannot reduce rates. This is not technically true.

Here are a few things you should all know about shipowners

1. They like to be flattered. Tell them that they have been chosen specifically and that charterers have been keen to fix with them for a long time. Massage the ego. Standard accross all industries!

2. Shipowners and shipoperating is extrememly competative. Therefore they are always looking for new business. Promise the world - tell them that this is ongoing biz for the right owner!

3. Find out who they compete with alot and tell them that they are USD 2.00 cheaper! So if Shipowner X is always competing with shipowner Y in many markets then play up to this. By telling them that their mortal competaive enemy is USD 2.00 cheaper then they will surely sharpen their pencils. The other thing is this - shipowners and freight traders find comfort in numbers. If they hear that 3 or 4 other reputable shipowners are also offering on your business at these cheap rates then somehow they can justify this internally.

So play up to that! Its not lying - its poker...

Welcome to advanced negotiating techniques 101.

This post is to give one back for all the unsuspecting charterers out there who have been flumoxed by the super clever shipowners. Sorry shipowners - next time I will let you into a few secrets into what motivates exporters and importers.

Understand your clients and make money!

Yours
VS

Monday, March 15, 2010

Best feedback award!

Jean Paul has left a new comment on your post "Starting a Shipbroking Business and The Shipbroker...":

quote

I just bought 'Shipbroker fasttrack' and 'Starting a shipbroking business'. I must admit I was a bit sceptical paying an 'anonymous' blogger claiming to disclose all these so called 'secrets and inside info... but I was even more surprised about the level of information I got! It is without a doubt and by far the best I've ever read on the subject and believe me I read a few.I started my first shipbroking steps in 1994 supported with a book called Shipbroking and Chartering Practice (Business of Shipping) by Lars Gorton, Rolf Ihre, and Arne Sandevarn, which was (and still is) a very good starting point; but believe me what the Virtual Shipbroker brings you as readymade ready to eat shipbroking practice full of chunky goodness!!

VS thanks for sharing this information. I have printed both books out and they will always within reach in my desk!!

Keep up the good work.

If it aint broke(d), dont fix it
 
JP
 
++
 
There you go - im Speechless and appreciative. I have already showed my wife and mother the testimonial!

It is genuine as are all my testimonials (incase you were wondering)
 
I am glad to get some critical acclaim from someone who has been there and done that!

btw - If liked those two you should read the Voyage Estimation Tutorial (and software) only when you get the chance! I am proud of what I have done there...good for all levels fo chartering execs.

(yes spoken by a true broker)

Thanks again - made my week!
 
Cheers
VS

Wednesday, March 10, 2010

Lets talk about ships baby!

Let's talk about ships, baby
Let's talk about you and me
Let's talk about all the good things
And the bad things that may be
Let's talk about ships
Let's talk about ships
Let's talk about ships
Let's talk about ships!

(The Original version of Salt n Peppers classic hip hop tune. Interestingly the music company didnt think shipping songs were contemporary enough and changed the word 'ship' for 'sex'.

(I prefer the original version and have it on vinyl)

Anyway - I will start some threads on the different types of bulk carriers out there. The sizes - the markets - the players.

Keep watching!
VS

Thursday, March 4, 2010

How to tell market rates for unusual shipping routes?

Thanks.Noted well...Can you please give some guidance on how to understand the market based on BDI & Fixtures reported. Normally fixture reports cover some major fixtures in major routes. How can we get an idea on the present rates in other routes for eg: An inter PG voyage
for a handymax or a PG / WCI trip.

Of course we can run a calculation. Apart from this is there any way?
Sorry if my question looks meaningless.
With Rgds

Varun



March 3, 2010 9:28 PM

The Virtual Shipbroker said...

Hello Varun

The bdi merely gives a general overview of the dry bulk market. but as you know thre are many markets within the bigger market.

The only way to tell the market for a specific route (if that route is not one of the major routes) is to run a voyage calculation. The may occassionally be a reported fixture but this is occassional and the terms are often different.

The best way to keep tabs on the market for unusual routes is to run voyage calculations every week. Thats what i do anyway on my voyage estimation software

Once you have an estimation proforma -  all you then have to do is add the updated Time charter market rate for the ship in question plus add bunker prices. Will take 10 seconds and the market is at your finger tips


Thanks for the qustion
cheers
VS

Wednesday, March 3, 2010

Breach of copyright

Someone (who will currently remain unnamed) has plagerised half my website and my books to try and sell and shipping sale and purchase manual.

If the manuals are as bad as his methods then I implore readers not to even consider it. I know who he is and he is out of line and charging people 5 times the price of my stuff.. Buy my 'starting a shipbroking business' for a fraction of the price and you get the same information.

I hate opportunistic profiteering. If he wants to build respectibility he should do it using his own experience and words - not mine.

Thanks to the people who sent me emails telling me of the breach.

He will be sued.

Cheers
VS

Tuesday, March 2, 2010

The BDI - whats going on?

Excellent article in the Wall st Journal regarding some of the big issues facing dry bulk shipping rates going into 2010.

Freight rates are subject to supply and demand - we know that. What many people outside shipping dont realise is that there are a number of unusual factors that are skewing freight rates.

1. Port congestion is still a huge problem. Most shipowners acknowledge that if the world ports worked efficiently the market would be halved. Port congestion takes ships out of the market and thus limits supply.

2. New Ships coming on stream. The subject of the attached article. New ships (all built during the boom) will increase supply and possibly kill the market.

3. Chinese governement stimulus packages. How long can this go on?

Imagine if we had lots of new ships, leess congestion and a chinese recession? Then again lets not.

Cheers
VS