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Tuesday, November 23, 2010

Shipbroker commissions - A question

And a good one too

On the controversial topic of shipbroker commissions

Qte

Anonymous has left a new comment on your post "Shipbroker commissions.":

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!


Unqte


Many thanks for the question which is indeed a good one. i do have some views on this topic but would like to open this one up to the readers to see what they think.

Anyone care to have 'a view' on this 'interesting" topic. In my book I made the point that many brokers 'dont have much to say" - so here is your chance. Having an opinion is good!

7 comments:

  1. Gd day!

    Why should the commission change since the amount will proportionally change in different sizes?
    Mathematically, this seems to me that you just need to have a certain amount of money, so that in small vessels you gain it by bigger comm and in larger vessels you have smaller one.
    I might be wrong, so please explain me.

    Thank you.

    ReplyDelete
  2. 2.5% commission on smaller vsls is fair - it makes it worth the brokers time and effort to focus on this segment, otherwise brokers would only focus on the larger sized tankers to bring home more of the monies!

    Also smaller tankers tend to be more specialised than larger tankers, trading chemicals, veg oils, cpp and dpp etc - and why should you get paid less for putting in equal amounts if not more work?

    ReplyDelete
  3. Thanks for contributions. It's an interesting one. I am not a tanker guy so I can only speak from dry experience.

    Sometimes working smaller ships can be great for a broker. There is more volume (more shipments - short sea - coastal etc) and the freight rates (per metric tonne) can be very high (due to ineconomies of scale).

    The other thing about smaller ships is that the market tends to be more niche which can meam more loyalty amongst brokers and principals.

    Both these point towards keeping commission uniform at 1.25 percent.

    Having said that - shipowners need to be careful. As Anon 2.0 Quite rightly pointed out they need to be careful not to create an environment where the best brokers leave the small handy market in search of better returns.

    It also seems to me that the Shipowner maybe cutting of his nose despite their face - Limit the commissions and powerful brokers will push cargoes to shipowners willing to pay 2.5 percent. That is a normal human (brokers) reaction.

    Im guessing though that the shipowner who has taken this position regarding commission payments - is powerful in terms of market presence - I could be wrong though!

    Good discussion.

    More comments welcome

    VS

    ReplyDelete
  4. parcel tanker trade survives on 2.5%.

    lets talk about address commissions as well! have seen 5% charterers adcom plus 2.5 brokers thats a whopping 7.5% ... well stupid in a way bcz the owner would have allowed for the 5% in his numbers...are adcoms just a mindset??

    ReplyDelete
  5. I agree with Suraz whereas the Addcom issue is sometimes confusing, if its just a mindset I dont know... I could definitely use some clarification on this one.

    By the way perfect blog, I am a big fan of it!

    ReplyDelete
  6. JP and Suraz - ok will make a comment on addcom issue in a fresh post.

    Thanks support.

    ReplyDelete
  7. Hello! I have some questions for you:

    If more than one broker is involved in the negotiation, what is the usual remuneration for each? Is it 1.25% for each of the brokers?

    May a broker be held liable for errors he makes in transmitting offers?

    Thank you so much for your help.

    ReplyDelete