Kudos to an avid reader

Hi All.

I have decided to bump this post (to a title post) from a reader because it highlights something very important for aspirants into the shipping industry.

Direct access as a trainee shipbroker may 'not' be the most effective method, in terms of cost and time. Remember its all about getting in the door, and just maybe, coming in through the side door has many advantages. I discuss these fully in 'inside shipbroking'.

Kudos to the person who left this message

"Hello,Congratulations on your blog, still looks to be going strong!
I began reading around about the time you first set it up, due to an inexplicable interest in the shipping industry I developed last year... You would hardly believe how much has changed for me since then - two months ago I took my first job, as a research analyst for a major shipbroker. I thought you might like to hear this because your blog contributed to my interest in the shipping industry (although as I say, I don't broke ships). Whereas your latest articles regarding China and Australia wouldn't have meant anything to me a few weeks ago - I eat and drink these topics on a daily basis now!
Ahh anyway, props on the blog".

++

Oh Yeh - here's some advice if it is a shipbroking job that is your ultimate aim. You may be happy being a research analayst and that is very cool too.
Here is the advice

- Dress appropriately - like someone who aspires to be a broker. What this means will depend on which country you are in and the culture of the organisation you work for. Dont show people up (by wearing gold chains MR T style)- just be aware. (after 20 years you can wear nothing but your birthday suit, if that is your liking, and if you are making money).

- Answer the phones whenver you can- Use answering phones as a way to improve your verbal communications. There is a good and bad way to answer phones beieve it or not. - You may over time begin to recognise voices and after w hile strike up conversations of your own with important customers.

- Within reason be seen to going an extra mile. Dont leave when the clock turns 6.00 - wait until 6.23!- At any reviews let it be known that one day you WANT to be a broker.

- Accept any invitations to industry events

- Ask me questions, buy my books and read my blog!

That should just about do it

See you there!
VS

A timely reminder

I was pouring over one of my favorite old books last night and I was reminded of a great saying regarding procrastination.

"Successful people are quick to make decisions and slow to change them. Less successful people are slow to make decisions and quick to change them" - Napoleon Hill.

Good philosophy for 'freight trading' and maybe other things in life.

Cheers
VS

Confidentiality

Hi All.

Currently I receive quite a few private emails per week from readers of the blog asking me questions and seeking advice on any matter of subjects.

I really enjoy receiving the emails and most of the time I respond fairly quickly. Hopefully the replies have helped a few people along the way.

With this in mind I just wanted to reassure anyone sending me a private email on virtualshipbroker@yahoo.com that these emails are indeed private and i respect the confidentiality of the sender.

If you answer via my blog that is a different matter and the question automaticaly gets published (which is great because it allows eveyone to learn and contribute to to a discussion)

So whether you are a current shipbroker, shipowner, charterer, Senior manager, or someone looking to get into the industry, keep that in mind. Private means private.

BTW - for me this is good business practice. It helps me build the VS brand. In 10 years time you never know there could be hundreds of successful shipping people out there who once asked my advice and got some good 'confidential' feedback.

When I am old an grey - thats gotta be good for a free lunch now and then!

Keep rockin!
VS

Address commissions - what are they?

Have been asked a great question regarding the make up of commissions. More specifically the difference between a shipbrokers commissions and a thing called "address commissions".

Here is the scoop.

- In most shipping transactions there are two types of commissions that are paid.
- Remember that in 99 percent of occassions it is the shipowner who pays the commissions.
- A standard 1.25 percent is paid to the broker for the service provided
- But the shipowner is also asked to pay something called an "address commission"

- An address commission is anywhere bewteen 1.25 and 5 percent, charged by the charterer and payable by the shipowner.

For example

Charterer A has 50,000 tonne to be shipped. When he sends this requirement to a broker he states at the bottom of the cargo order that an address commission of 2.5 percent is to be included in the shipowners calculation.

The broker then adds his 1.25 percent and by the time the order reaches the shiponwer there is a total commission value of 3.75 percent payable by the shipowner to the broker and the charterer.

This now becomes a fairly large cost for the shipowner and the shipowner must now allow for this cost when calculating the required freight rate. After 20 minutes of analysis the shipowner can see that without any commissions this biusiness is worth to him approx USD 50.00 per metric tonne to carry. But with 3.75 percent commissions payable he must now add a further USD 2.00 per metric tonne to cover this cost. So he offers USD 52.00.

HANG ON! I hear you say. Why would a charterer ask for an address commission when all he is doing is increasing the cost to the shipowner and therefore making his freight more expensive?

Good question. The more commission he charges the higher the freight bill. But the main reason is this. ACCOUNTING! Many charterers have large shipping departments that cost money to run. They need a mechanism whereby they can direct moneys toward the running of this department taking into account accounting principals and tax laws.

The bigger the inhouse shipping dpearment the bigger the cost and this may mean the bigger the address commission.

This the main reason for address commission - but the truth is that shrewd charterers also use address commissions in their trading strategy. That is a whole new story!

Anyway i hope this helps explain one of the many mysteries of the bulk freight market!

Any questions just drop me a line

Yours
VS

The next VS writing project

Well it looks overwhelming - "our word is our bond" a shipbrokers perspective looks lke the winner. Im surprised because I hought that the world NEEDS to kno what really goes on in Asian Koraoke bars.

Just joking - well not really - best not to go there.

mmm - the poll was a joke I hope you all realise that. Im too busy to wrtie another book! - but you never know "our word is our bond weather permitting without guarantee" is not a bad topic.

Leave it with me....Im off to try and find a decent surf break.

Yours
VS

Travel

Hi all. I am travelling once again. A mixture of business and pleasure. With the business now over I am off to sit in the sun for a few days. Some surfing and snorkelling should clear out some of the spiderwebs that have formed between my ears, after a challenging 12 months.

Reminder to those who take the plunge and purchase one of the e-books. Its imperative that you print a copy of the book once downloaded. For security reasons you are only allowed a certain number of downloads. One or two of you have emailed me asking me to send you a new link because you failed to print the book.

Yours
VS

Interesting Week

Hi All

Interesting week ahead for the shipping markets. The indices have dropped significantly over recent times and shipowners are starting to get nervous.

Lots of good news coming out of the developing worlds with regards to growth but there is still a huge questionmark as to whther this growth is sustainable (mostly based on government spending) and also the effect of freight rates on things such as stockpiling by the Chinese.

China imported record levels of iron ore last month and although freight rate firmed they did no go ballistic like previous years. There is concern now that we may see a sustained market sofening in the short to mid terms.

Also on the horizon is a huge influx of new ships coming ex yard. This means an increase in the supply side equation and hence more pressure on freight rates. In order to balnce this the market is waiting to see if shipowners start to scrap older vessles in order to keep the market at reasonable levels.

BTW a big thank you to all those who continue to support the blog and the books. Yesterday sold a book to someone in South Africa. Sofar people in 26 countries have read about the mysteries of international shipbroking as explained by VS. The feedback is always appreciated.

Have a nice week wherever you may be!

Yours
VS

China vs Australia

Those keen followers of international events will be well aware of the new cold war, gaining in intensity, between China and Australia.

Here un a nutshell is what has happened

- China is a new world power
- Australia has lots of stuff that China wants (iron ore and coal)
- China has made lots of Australian Resource firms / individuals extremely wealthy.
- Australia's natural resources have helped China grow at a staggering rate.
- Prices for commodities and for bulk shipping have grown exponentially

- China, trying to figure out a way to pay less for resources tried to buy a substantial amount of shares in the worlds second largest mining company - Australia's Rio Tinto. The worlds largest mining Comapny, Australian and Dutch owned BHP Billiton, also made a play for Rio Tinto.

- After much discussions and a change of policy from Rio Tinto both deals died. China was not very happy.

- At the same time as the attemted buyout, the price of commodities jumped once again, making China even less happy - as they now are remninded how little power they have over the price of raw materials.

- China then arrests 3 Rio Tinto Executives (One Australian and 2 Chinese Nationals) stating that Rio Tinto have knowingly been bribing Chinese commercial interests and thus gaining significant price advantages - totally 130 billion dollars over a number of years.

- Interesting timing if this corruption has been going for a number of years

- Rio tinto and BHP have reduced the numver of shipments to china in recent weeks.

Australia refutes the 130 billion dollar claim (from Chinese news agencies) stating that the total monetary amount of iron ore exports do not come near to this figure - let alone as a price differential.

Tit for tat

This my friends is the new version 'Cold War' and the stakes are rising everyday.

This type of incident also highlights the realities of international trade and international shipping. Lobbying, Corruption, Co-ersion and Salesmanship taking place on a massive scale with lots of vested interests. Most of the time it goes unnoticed and is even deliberately ignored by many of the worlds agancies set up to police these things.

In some parts of the world, for better and for worse, nothing can be done without the proverbial 'paperbag' payments. China is one example. In other parts of the world the systems and the players are more accountable to authorities.

What to do? Even in the most sophisticated of legal systems such as the USA, a Bernie Madhoff was able to prosper. The UK and the Europe is also littered with high end (and low end) crooks of the same ilk.

So we cannot blame so called corrupt legal systems and we cannot afford to cast judgement over perceived cultural biases.

This kind of thing, in my opinion starts with the individual.

My advice! Always be aware of the system within which you operate HOWEVER make decisions based on your own moral compass.

Will be interesting to see how this cold war develops over the next few years.

Yours
VS

Wall St Journal

I see the link isnt working so here is the full article

SINGAPORE (Dow Jones)--About 830,000 metric tons of gasoil is in floating storage off the coast of Singapore, with stockpiles likely to build as the regional contango starts to widen, making East-to-West arbitrage shipments less attractive.
The fleet of tankers on time charter includes two LR-1s, five LR-2s and two Suezmaxes storing a total of 830,000 tons of gasoil, according to a survey of fixtures provided by Europe- and Singapore-based shipbrokers.
With the contango in Asia widening since mid-July and the flood of middle distillates to Europe narrowing ICE gasoil time spreads since end-June, traders have started booking larger, newly built vessels to store gasoil off Singapore at cheaper freight rates.
In addition, a decline in global demand for shipping has led to an excess number of large ships on the market, said a Singapore-based shipbroker.
"Floating storage is a creative solution (for traders) instead of building more storage space."
Large new builds, which typically are destined to carry dirty oil products such as crude oil, often lack approval from major oil companies and can transport clean cargoes on their maiden voyage, shipbrokers say.
A wide contango - a structure where near-term contracts are priced cheaper than those further into the future - offers potential profits from buying gasoil at current prices, storing it on ships and selling it at a future, higher price. Since mid-July, the contango between prompt- and forward-month Asian gasoil swaps has widened to as much as 80 cents a barrel, according to brokers.
"The arbitrage (to Europe) looks less favorable," said a Singapore-based trader. "Storage is less profitable in Europe and more so here in Asia."
Trafigura Group, for example, booked the newly built Suezmax vessel NS Burgas in mid-July to store 140,000 tons of gasoil off Singapore for between 90 and 150 days, according to a Europe-based shipbroker.
Trafigura, one of the most active players involved in floating storage around the world, chartered two LR-2 tankers at the end of July - the newly built NS Asia and NS Antarctic - to each store about 100,000 tons of gasoil off Singapore, according to two Europe-based shipbrokers. The NS Asia is on time charter for between 30 and 120 days, according to one shipbroker.
Trafigura executives weren't immediately available for comment.
Meanwhile, Vitol Holding B.V. booked the newly built Suezmax ship Kamari in early June to store 100,000 tons of Taiwanese gasoil off Singapore, shipbrokers said.
Royal Dutch Shell PLC (RDSB) and Sempra Energy (SRE) also were heard to fix tankers for floating storage off Singapore, shipbrokers said.
Shell's tanker Silvaplana, which has been storing 90,000 tons of gasoil off Singapore since late May, may unload its cargo in Europe and become available for loading in the Port of Rotterdam in early September, according to a Singapore-based shipbroker.
The amount of gasoil stored off Singapore is just one tenth of the between 7 million and 8 million tons of middle distillates stored at sea around the world, according to shipbrokers. About 5 million tons, mostly gasoil, is in floating storage off Europe, with another 2 million tons being stored off Middle Eastern and African shores, according to two Europe-based shipbrokers.
By Wayne Ma, Dow Jones Newswires; +65 6415 4065; wayne.ma@dowjones.com

Creative Shipping Solutions - Tankers

This article is great. It outlines some of the creative ways that shipowners look to preserve market rates.

It also highlights the fragile state of the current markets. Over supply of ships and strange trading patterns emerging. See if you can understand the meanings of words such as 'contango' and 'arbitrage' in a shipping context.

http://online.wsj.com/article/BT-CO-20090805-704627.html

Yours VS

Next writing project

Here is a major new initiative. The chance for you the readers of this blog to pick my next writing project. I have started a poll on the topic and you can start voting now.

1. "shipbroking" - the musical.
Laugh and cry your way through 4 hours of music, lyrics and interpretive dance - penned and choreagraphed by me! Set entirely in an Asian karaoke bar.

2. "Shipbrokers who have changed the world". A practical book so small that you can carry it in your wallet.

and 3.
"Our word is our Bond - all going well, weather permiting, without guarantee" - a shipbrokers perspective.

This is serious people - Help me decide..

Cheers
VS

Shipbroking obsolete?

Hi everyone.

I have had a busy few weeks. Only now do I have a few moments to sit at my computer and answer a emails. With this in mind I have only just now replied to a private email from a reader of the blog (tks Ryan). The question is a good one and I thought the answer will benefit the readers

Q. My first question relates to the longterm viability of the profession: Will the web, which can provide a central place for shippers and shipowners to identify each other, render the role shipbrokers obsolete?

Short answer - No

reasons asf

1. Shipbroking is a skill set. Apart from pure brokers we have shipowners and charterers who also utilise these skills therefore the profession will live on...

2. Over the last fifteen years hundreds have tried to set up web based platforms only to fail. Some of the higher profile ones have spent hundreds of millions only to disappear.

3. Shipbroking is more than matching cargoes with ships and buyers with sellers. People trade freight and make millions (billions) in the process. Let me explain - Bulk ocean freight is not so much a cost but a tradeable commodity. Complicating things for those wanting to make the process simpler is the fact that freight as a commodity is far from homogenous and is traded accross a fragmented world market (legally, commercially and ethically). It can take weeks to transact and there are lots of terms, conditions and clauses that need to be agreed.

Currencies, equities, prok bellies - trade the price and the quanity and then press the red button - easy peasy.

4. Charterers in particlular ' need' brokers expertise. Many charterers do not have the necessary knowledge. Some deals are worth million in freight costs - the price of an expert broker is small in the scheme of things.

5. The status quo. Too many people have too much to lose by upsetting the apple cart. Only 50 percent of deals reach the wider market. As a broker and a principal the last thing I want to do is to publish and circulate my 'positions'.

Lastly - Can you imagine a realestate market without brokers - i cant!

Great question - if anyone would like further clarification drop me a line!

Brgds
VS