Sneak Peek

Check out the VS Voyage Estimator Blog for a 'sneak peek' of the software.

Cheers
VS

Happy Festive season to you all!

To the buyers of the books, the followers, the students, the posters, the consultees......thanks to you all for a wild ride in 2009.

Wishing you all a happy festive season (and christmas for those of you who are christians).

In the shipping world Christmas is a time when business almost comes to a halt. The same goes for Chinese new year celebrations which are also not too far away.

So those of you luck enough to have a break - recharge those batteries, spend time with family and friends and take time out to remember that there is more to life than Shipping...........

For those of you who will work through the break - your time will come. On the occassions I have found myself working over this break - I have welcomed the relative peace and quiet so its not all that bad.

Enjoy!

One for the road - crank the volume up to 11!

VS

The price of a ship to hire?

We have had many discussions regarding how, in bulk shipping, do shipowners calculate the price of their ships at any given moment. How is it that one day a ship is woreth this much to hire and the next day the rate is different? How is it that two seamingly similar vessels are rating the same cargo / business at very different rates?

This answer is long and varied and my voyage estimation pack will answer this question and more in great detail.

But alas I have a short answer! And this is the truth.....so take note any unsuspecting charterer or mining company..

A SHIPOWNER WILL CHARGE WHAT HE/SHE THINKS YOU CAN PAY!

Say it loud - bulk shipping is a commodity business (the commodity being FREIGHT) not a cost business.......

This also explains why shipbrokers and freight traders get paid the same if not more than commodity traders and brokers. Many people think that organising shipping is the menial job of a lowly paid shipping clerk.

When people realise that millions are being made and lost and that bulk freight is highly negotiable, tradeable commodity - then we get closer to the truth.

Keep rocking
VS

Another legal question

A shipowner fixes a piece of voyage business with a named ship - MV Blindhope
(as opposed to fixing the cargo basis a TBN - without having yet decided on which ship will be used).

The new voyage business laycan is 3 weeks away and MV Blindhope is finishing the last voyage before proceeding with full despatch to the load port for the NEW business in question.

Scenario - whilst discharging the cargo in the previous voyage something bad happens. Another ship collides with the MV Blindhope. The result being that the MV Blindhope is no longer able to present itself for the NEW business for which she has been fixed...

Question - Does the shipowner need to provide 'another ship' for the NEW business?

(The laycan is 3 weeks away and there are plenty of ships in the area than can be chartered to fill this cargo obligation...)

cheers
VS

Update on the VS Voyage Estimation Pack

Hi all

As discussed previously getting this pack together has proved a little more chellenging (and costly - ha) then i had envisaged......BUT we are almost there......

The basic voyage estimation software has been tested and after a few gliches looks ready to go. All that is left is for me (VS) to 'write up' the accompanying educational booklet. This book will containing step by step examples of many of the most important voyage / trade routes. It will also explain in depth how a shipowner, charterer, freight trader and shipbroker, can use the 'art' of effective voyage calculation in ones everyday working lives.

I reckon its going to be a fantastic resource for any level and type of bulk shipping executive. It will also be an incredible teaching tool for those interested in freight trading, shipowning, cost effective chartering and power shipbroking!

I have been extremeley busy on a number of fronts and I apologise for the delay in rolling this out. My most recent guess for completion in Mid/end January. (maybe 1 month away)

Thanks again to those of you sending me messages checking on its availability.

Cheers
VS

Incredible display of fortitude...in the face of a declining BDI.

a shipbroker 24 hours after learning of the BDI's rapid recent decline. Giddy Up!


At Virtual Shipbroker we dont condone this type of behaviour. 

Late for laycan? Charterers happy - why?

In response to the previous thread find my answer below

Hi guys

Good answers everyone.

Unfortunatley the shipowners cannot walk away if they are missing cancelling. Only the charterers can. So 99 percent of the time the owners "dont want to be late". They lose all power.

Plus if the market does rise - why would the charterer not accept the ship a little late? 99 percent of the time they will.

In the above situation the charterers could be happy for a number of reasons...

1. The market has dropped. But alas - this is not enough. For this to be good for the charterers we need the market to drop but we also need another ship! On many occassions when a ship does miss cnacelling - there are no alternative ships due to the prompt nature of the situation.

2. Maybe the charterer has had trouble accumulating cargo at the loadport. There may also be congestion at the loadport...for all these reasons it is advantageous for the charterer is the ship runs late. They will still accept the ship but they will limit possible demurrage claims due to making the ship wait before loading.

Hope this makes sense. Any questions just shoot (from the hip)!

Thanks to all for the contributions.

Brgds
VS

Another interactive chartering question!

A laycan is the window of time, allocated by the charterer to the shipowner, for the arrival of a ship.

So if an agreed laycan is 01-10 December then the ship must arrive within these dates in order to avoid a possible penalty.
Consider this:

The ship in question is missing the cancelling date and looks like arriving on the 11th of December. But far from being mad the charterer is very happy...

Why?
Cheers
VS

Why do many shipowners selectively circulate open positions? Answer...

I have bumper the answer from the previous post so that everyone can read.

Quote

Nice feedback everyone.
Gregocebr, Gary and Varun - all spot on.
The main reason is simple supply and demand.

If a shipowner has 20 ships and 7 of his ships are open over the next month in Singapore / Japan range for example - then he / she would being doing themselves a disservice telling the world that they have 7 ships open around the same time in the same place.

Makes more sense to say you have 2 ships open. That way charterers think there are less ships (supply side economics) to choose from then there actually are. "Shipowners hat" - Less tonnage supply means better bargaining position -means higher price.

(same reason in really low market shipowners layup some vessels. Ie to reduce overall supply in the market and thus keep overall prices high)

And as Gary quite rightly points out - charterers can play the same game. Many charterers have more than one cargo but you would never know. They tell the market there is one cargo, quickly fix one ships and abracadbra 2 days later they take a second ship for what looks like the same requirement. Funny that.

Smart play! If they (charterers) had told the market (shipowners) that there were two open cargo positions that would immediately lessen their bargaining positions because more cargo means more demand(for ships)and thus the propensity for higher freight prices.

That my friends is why brokering is not just about matching open ships to open cargoes.
It is also a huge reason as to why internet trading platforms will only have limited use.

And above all else its a huge reason why shipbrokers need to have close relationships with clients. The best brokers have inside information and protect/circulate that information in ways that lead to more deals now and in the future.

Many thanks for the question and the contributions.

Rgds
VS

A good question from a reader

Qte
Dear VS
Why would shipowners not want to open their fleet details to the market? In high BDI days, would this not be an advantage to them, as now they can have many brokers fighting for the business, and they can have a stronger arm to negotiate and get best deal for themselves.

Yours
Zubair
(Amano)
unqte

Good question Zubair

I might leave this one open for any readers to try and answer. Can anyone think of a reason/situation why a shipowner would not want the market to know all his open positions?

Cheers
VS

Apologies

Every 6 months I will write a new post apologizing for my poor spelling throughout this blog.

I write and I press without checking.....

To all concerned - I apologize for my spelling.

Regards
VS

Win a Car!

Ok - the 30,000th visitor wins a car - Will it be you?

Another Legal Question

Peter asks

"VS a friend of mine returned home in the evening to find his wife in bed with the neighbour. When he files for divorce can she still claim half his assets?"

Great question Peter - unfortunatley, unless the bed in question is a water bed in the shape of the "ss minow" (Gilligans Island) the topic is beyond the scope of this blog.

However...Please send our collective condolensces to your friend during this tough time.

Solemnly
VS

Two tiered chartering market

One of the students which is currently undertaking the 'Virtual Shipbroker 3 month 'chartering' Mentor program' asked me a good question today.

When a charterer sends you a tc order or cargo position how does a broker know where all the ships are?

Ok here is the scoop. There are two tiers of shipbroking and chartering markets out there.

The lower tier is all the business that is seen in the various shipbroker trading platforms ou there. Small charterers, small shipowners, older ships, cargoes that are not firm, business that is not considered first class. You can if you wish enter into these markets and try your hand and doing some fixtures. Some people are no doubt making money doing this. But it is a risky business.

Then there is you first class market full of major public and private companies. Those who are doing 90 percent of the worlds big business. When you broker these markets you will receive between 700 and 1500 emails per day with both cargo and vessel positions. Guess what? Its the junior brokers job (most of the time) to update the inhouse vessel database with these open positions. A junior broker will sometime spend half his/her day on this task. Its great practice - as you get to know your geography, the names of ships and shipowners etc.

To lend a helping hand most shipping software these days comes with programms that can read the incoming emails and automatically update ship positions for you! Wow - who would have thought.

Anyway - when a new cargo comes on the market the first thing on a brokers mind is to quickly whip up a list of suitable ships. So if the junior brokers and the software has done its job within seconds a broker should have 20-30 or 50 possible candidates at the tip of his fingers. Then the phone calls begin in earnest!

Two important points
a) imprtant to have shipowners trust you enough to send you there ship positions
and
b) Many shipowners and brokers guard this information with their lives (from other brokers and traders)

Why? Because shipping is not a cost business people - its a commodity. Say lit loud - Bulk freight is a commodity business and people are there to make money........and therefore 'information' is worth gold!

Wheres my valium?

Yours VS

Great question from a shipowner reader of the blog

The following interesting question was asked on my post regarding the definititon of a 'ballast bonus'

I have decided to BUMP the question and you guys can make up your own minds.

Qte

From ANON

Here is a tricky one for you. My vessel is opening in West Africa. The Charterer wants to take the vessel not dlosp but rather APS Recalada in order to load Up River Parana. We agree a daily rate and then we also agree a ballast bonus of xxxx$. My vessel begins its voyage to Recalada crossing the Atlantic, is eventually at Recalada and the ballast bonus paid. The day after and after receiving the ballast bonus my vessel for some reason has an electrical default and burns not being able to perform the agreed trip. The question is DOES THE CHARTERER HAVE THE RIGHT TO CLAIM BACK THE BALLAST BONUS???????

Unqte

Hello Anon and thanks for the question.

First let me say that I am not a lawyer so the following is only my opinion. A few things remain uncertain in your story that would require clarification.

1. If the vessel has delivered and you have infact recieved the ballast bonus payment (usually a few day after delivery) has the ship infact started loading the cargo? If ther is cargo onboard this would complicate the issue.

2. Can the ship be fixed / repaired at the port or nearby. What is the time frame for repair.

3. Has the market changed significantly since the fixture was agreed and are there other ships around?

++

We dont know the above information but here is my intial thoughts. When you agreed the contract with the charterer part of any shipping contract stipulates that you must provide a ship in fully working condition for the 'entire duration' of the contract. If for some reason you cannot, and this reason has nothing to do with the charterers, then technically you would be in breach of contract.

Then you have to think about a remedy.

The charterer will probably argue he is within his rights to insist that you perform either with this ship or another one. Then it could be an offhire issue etc

If you cannot perform then he would probabloy seek damages and this would be reflected in the price of chartering a replacement ship.

The question here is does the Ballast Bonus come into play? - Well my opinion is that the ballast bonus although not charter hire, has been factored into the overall cost to the charterer and thus would contitute an unexpected loss to the non performance of the contract.

Again I am not a lawyer so this is only my opinion and I am sure the legal jargon I am using is not 100 percent on the mark - but you get my drift. Its reasonable to assume (and the law/arbitrators should reflect what is reasonable) that due to no fault of the charterers they should not have to forgoe a huge lumpsum ballast bonus payment - especially when you are ulimatley walking away from all resonsibilities...

Thats my opinion anyway - I am sure you could mount an arguement the other way...

Feel free to disagree..

++

Love the question - if anyone else want to pose another legal questions for debate - go for it!

Cheers
VS

Nice website

I wanted to tell you guys about a website.

Shipbroker Portal. These guys have put together a excellent interactive website for all shipbroking and chartering professionals. They have highlighted the Virtual Shipbroker blog so kudos to them. Check it out.
Cheers
VS

Never a better time...

To raise the overall barbarous tone of this blog

Poem lyrics of 'With Ships the Sea was Sprinkled Far and Nigh' by William Wordsworth

quote

With ships the sea was sprinkled far and nigh,

Like stars in heaven, and joyously it showed;
Some lying fast at anchor in the road,
Some veering up and down, one knew not why.
A goodly vessel did I then espy

Come like a giant from a haven broad;
And lustily along the bay she strode,
Her tackling rich, and of apparel high.
The ship was nought to me, nor I to her,
Yet I pursued her with a lover’s look;
This ship to all the rest did I prefer:
When will she turn, and whither? She will brook
No tarrying; where she comes the winds must stir:
On went she, and due north her journey took

Unquote
 
An interesting aside - The above poem was written in 1806 and only 3 years, later in 1809, Wordsworths sister Dorothy died in a shipwreck, from which only the captain survived. A dark cosmic irony.
 
VS

A time charter concept explained

What is the difference bewteen a 'time charter' (TC)  and a 'time charter trip' (TCT)?

We know that Time charter means that the charterer pays a daily hire rate for the ship for example usd 10,000 per day. Next step - A time charter can either be for a specific trip (A to B) or for an extended period of time (period time charter)

So there you have it - a TCT is from A to B and usually has very specific and well defined delivery and redelivery areas.

A 'period TC' can be anywhere from 2 months thru to 10 years and by necessity has less well defined delivery and redelivery areas. (I dont know where i will be tomorrow - what hope does a shipowner have prediciting where his ship will redeliver in 3 months time?) When quoting a period order - the estimated duration should always be quoted.

++

If when you see a time charter order quoted by a broker - you are unsure if it for a trip or for period then ask the question back to the broker. These days there seems to be some competititon as to who can describe a particular order using as little important information as possible.

Happy fixing

VS

Its Booming Baby!

Incase you guys hadnt noticed - the shipping markets have exploded over the last few months. The BDI after hitting new lows last year of around 800 points has now roared back 5 fold to be once again over 4,000 and double the 100 year averages.

What does all this mean?

Ships are more 5 times more expensive to hire so many shipowners have retreated back to their caribbean islands content in the knowledge that everyday they are so much richer they could buy half of Los Angeles and 4/5 of Detroit.

Brokers are 5 times richer and once again q'ng up to buy the best that Enzo has to offer, and charterers are asking the same old questions - why did this happen? my company is losing money! (but lucky for me I an a shipbroker by trade so i can move if I have to!).

Big salaries are back and bonus's will be huge. The bull recruitment run is here in earnest and most of the major shipping centres are severely short of experienced chartering and brokering personel.

This is it - jump on board - Happy Days!

VS

The voyage estimator

Update to those of you who have shown be interest in the voyage estimator pack that I am trying to develop. I say trying because the process is more trying and complicated than I had imagined. But we are slowly getting there. Keep the questions coming. And Peter - you will be the first to know!

I am sure it will be extremely useful for some of you - mostly those already in shipbroking, shipowning and chartering but also for those wanting to use it as an advanced learning aid.

The best thing is that despite the cost and time taken even if no one else wants it...than nothing lost because I will be using it for my biz anyway! So its all good.

Almost the end of the week!!!!!!!!! Enjoy.

VS

TC vs VC part 2

Here is an interesting way to look at the TC vs VC decision making process.

Another tough one to get your head around - so bare with me.

Lets say you the charterers have a cargo of coal ready to fix on voyage charter to a shipowner. The shipowner will price this voyage as follows

Cost plus margin (expected profit) = total freight charged.

The point here is that the shipowner will only move the cargo if he sees a profit. Or put another way - you the cargo owner are paying someone a margin to move your goods.

So the other choice you have is to remove that margin by doing it yourself at cost. This means instead of Voyage Charter you decide to try Time charter.

The only problem with attempting to do this voyage at cost (time charter) is that now you have extra risks and responsilities. You also need more xpertise and manpower to execute the voyage.

This is where the margin (payable in a voyage charter) goes. In a voyage charter you are paying a slight premium because you are giving over risk and expertise to a shipowner.

The reason why I have been thinking about these concepts is because I am currently mentoring a very small group of students who are super keen to expand their shipbrokering and chartering knowledge.

This blog process helps get the concepts clear in my mind.

Hoping it helps you too..

Yours
VS

Time charter or Voyage charter?

Time charter or voyage charter? That is the question!

In "Inside shipbroking" and "shipbroker fast track" I discuss these concepts in some detail.

I delve into some of the differences and give explanations as to why a charterer would pick one over the other.

But after a few recent events in my neck of the woods, it got me thinking and that can never be good. It made me ponder for a moment too long about the decision faced by many charterers: Voyage charter or Time charter?

And following on from that restless stream of consciousness I began to think about shipping in the old days, when cargo owners were really cargo owners, shipowners were really shipowners and the English were good at Tennis. Back in those days (before colour tv, before Puskas, before David Hasselhoff) all we really needed was a voyage charter. Contractual parties knew exactly the roles they played and off we went to sea.

But soon thereafter, other creatures called ship operators begin to emerge from the gloomy seaway fog (as necessary as they are to provide competition and to spread risk) and TIME CHARTER became the drug of choice for those looking to make a "MARGIN" from the changing tides of international shipping and life has never been the same since.

Or maybe not.......

I charter therefore I am

VS

Shipbroker Translation

Hi All

I have added a translation tab on the right margin for those of you who cant read English. Come to think of it if you cant read English then you probably cannot read this post........

Anyway - if you know someone who cant speak English but has an interest in bulk shipping be a chap and let em' know about this new initiative!

It was either that or for me to learn 12 languages...........I struggle with one.....thanks to Google translations!

Thanks
VS

What is a Ballast Bonus?

"mmm - Ballast bonus" (say like Homer Simpson)..

One of those complicated chartering concepts that confuses many people.

This will help those of you interested in voyage estimation.

A ballast bonus is a time charter concept and it refers to a lumpsum payment 'sometimes' made to a shipowner (by the charterer) as compensation for delivering a ship in a loading region of the world!

Whats that in English VS?

Ok lets see of I can explain. Some regions of the world are NET loading regions and some are NET discharging regions (also described as importing regions and exporting regions).

In many cases for a ship to enter a loading region she needs to sail there empty (ballast leg) because there are no inbound cargoes. So who should pay for this empty leg? As discussed previously the charterer usually pays for this leg. The reason is that the shipowner probably has other alternatives that do not require such a long empty passage. So its a matter of user pays.

Question is this...What if the ship has already started the empty passage to a loading area without having yet secured an outbound cargo? This happens alot. Shipowners will take a risk and not fix their ships too early in expectations that the market will rise in the short term. So after discharging their last cargo they will up anchor and sail to a loading region. One example of a loading region is the USG. Many ships from Europe will take the 2 week empty trip across the Atlantic on spec hoping that something will come up over the next 2 weeks.

This is where a ballast bonus is often paid. The shipowner will rate his ship basis a market time charter rate plus he will add in a ballast bonus lumpsum rate as compensation for sailing empty from Europe. The Ballast bonus should reflect the cost of the empty ballast in terms of time and fuel.

A typical fixture that will involve a ballast bonus might look like this.

"Freight hire usd 20,000 per day plus a ballast bonus of USD 280,000 lump sum"

Riveting stuff. I would much prefer to talk about football........but everything has its place.

Any questions just shoot.

Yours
VS

Pirates!

Interesting the commercial costs of pirates. Anyone looking at sending ships into and out of pirate hotspots is currently paying huge freight premiums. Shipowners (and their insurers) are either slugging charterers huge safelty premiums, or in many cases downright refusing to send ships into those regions at all.

The refusal to send ships into a particular region has consequences on freight rates because a smaller pool of ships means less supply and thus higher prices (for that trade)!

Its a huge problem and as a global society our ability to deal with it in an effective manner continues to be tested.

In my opinion, the first logical step is to lobby the Hollywood heavyweights to immediatley cease creating pirate movies starring Johnny Depp! Everyone wants to be a pirate........

I am offcourse being flipant about a real problem. Lets see how the world deals with the pirate menace over the ensuing months.

Yours
VS

Awful Websites

Ive gotta say that gee there are some awful shipping websites out there.

The biggest problem seems to be the plethora of ship trading websites. Ive talked about them before. They are the ones that ask you to fill in cargo and ship postions and offer you access to 15,000 companies.

Here is what they do. Most of them have no idea about shipping. They merely set up a website, design a basic interface, import a directory of shipping company names and then illicit people to give up important marketing information. They offer the dream that in return you may have found the shiptrading eldorado and riches will be yours. The reality is that after one or two visits, you realise it is a scam and never return.

But that doesnt matter because the website owner has signed up google advertising to his/her site and will make USD 1.00 per day in advertising clicks from google. They may also onsell your company details to others willing to pay for the information.

There are now about 30 such portals out there - and probably 28 too many. Someone will get it right one day...

Another excellent green shipping initiative

http://www.sustainableshipping.com/

Good to see a proper discourse in sustainable shipping!

Incase you're wondering who is reading

Nice to see this blog and the books getting some wider recognition from the shipbroking establishement. Over the last few weeks had 2 ceo's/owners of shipbrokerages buy 'Inside Shipbroking'. Also had the head of a large European shipbrokers association and a leading charterer take the plunge.

Hope you enjoyed the books and kudos for taking the time out to see what your constituants are reading.

Yours VS

Outside the box

The worlds largest iron ore Company Vale of Brazil has an international trainee program. Although not specific to shipping Vale is one of the largest charterers of ships in the world.

http://www.vale.com/vale_us/cgi/cgilua.exe/sys/start.htm?sid=148&infoid=2270

Challenges facing shipbrokers over the next 12 months

A reader of the blog sent me a question that was part of a trainee application process.

'The global financial markets have changed quite significantly. What are the challenges that shipbroking companies will face over the next twelve months?

Being the guru of shipbroking - how would you answer?

Here is my answer

qte

Hello Anon

Because you called me 'the guru' of shipbroking I will be gracious enough to give you an answer.

I first have to say that 'dont you love these questions - not!' Most likely dreamed up by a HR department that needs to justify its existense and hiring process..

Why we expect / suspect that a 21 year old can see past the pub, their lobido and their next paycheck is anyones guess. Having said that we should try and answer the question with as much aplomb as possible..

Any campny, not just shipping companies, would need to consider the following things during a financial crisis
1) Decrease debt
2) Decrease costs (hring juniors is a good way of doing this, also no biz class travel, long lunches etc)
3) Maintain current client base (its harder to find new clients than to keep good ones)
4) Offer new services (finance is the latest hot thing)
5) Keeping successful shipbrokers happy in non financial ways. (training courses, friday pizza, beer etc)
6) Keeping up morale as revenues decrease - anyone for Tony Robbins?
7) Providing ongoing training and leadership - Yes i said training and leadership!
8) A big one is the fact that shibrokers earn their revenue in USD. And the USD has taken a huge hit against most currencies. So Shipbrokers need to manage this risk.
9) Greater access to China, India and part of South America
10)Market their products in a more effective manner.

It is written..(not very well)

(BTW I would not write all those down - pick your top five and the ones that are least likely to offend!)

Thanks for the great question

Cheers
VS

unqte

Green Shipping - Good Initiative

Greening up Shipping!

I will support any venture that helps us shipping people 'collectively' feel better about what we do for a living! A good vibe breeds action and the more action the better.

http://www.greenaward.org/

regards
VS

Shipbroking and Public School Nepotism (uk)?

I thought I would bump a reply i have made in a thread in answer to a question by a reader asking in essense if Shipbroking was a closed shop open only to rich kids from British Public schools.

A common and reasonable question.

Here is my Answer

Qte

Thank you for the post - and good question.

Here is an open secret. Shipbroking, stockbroking and realestate have since time immemorial been bastions for academically underachieving, gregarious lads from public schools!Also you will note that any profession with average salaries obove USD 85k will have as the majority of its protagonists people from the middle upper classes.

BUT - the good news is this. There are many ways to skin a cat and this was one of the major motivating factors behind the blog and writing 'Inside Shipbroking'. The reason was to dispell some myths, blow open some locked doors and make people realise that as an employment market 'shipping' is a very open propostion.

Also note - that times are changing. 20 years ago the old school tie was hugely important - less so now.

The other thing you need to remember, which I have pointed out in my books, is that you need to play to your stregnths and have a strategy that matches. So if you are from the wrong side of town, smoke illegal cigs and have a tattoo that says 'PAIN' written across your knuckles, then trying to get an internship with a rugby watching/golf club wielding London based Shipbroker may not work (but it might).

May I humbly suggest you check out 'Inside shipbroking' for further clarification..

Thanks again for a good question

YoursVS

APS vs DOP - How it ties into a voyage calc!

Following on from the previous posts explanation you will note that I have stated that APS and DOP are time charter concepts. Now your reasonable question to VS is 'How then does this effect a voyage calculation and hence a voyage contract?".

You will note that in the voyage calculation example on my voyage calc blog that an essential part of the formula to find out the 'break even voyage freight rate' is to know the time charter in price. So this is where it fits in. The delivery also effect the number of total days in the voyage and also the speed and consuption of the ships basis sailing fully laden or in ballast..

Sound confusing? Once you start doing regular voyage calculations it will make sense - and quickly too.

In the voyage calculation pack I will give examples that look at different delivery scenarios and how they effect the bottom line..

Still a few weeks away...but worth the wait.

Cheers
VS

APS vs DOP - Voyage Calculation essential concept

This post is to explain a little more about some of the essential concepts involved in 'voyage estimating'.

This one is a doozy....and has confused many a trainee and experienced shipping person over the years. Shipowners understand the concept by in my experience brokers have a rudementary idea, and charterers even less of an idea (especially voyage charterers)

APS vs DOP ship delivery.

Definitions first

APS = Arrival pilot station (at new port)
DOP = delivery dropping outward pilot station (at last port of discharge from previous voyage)

Second important point: These are time charter terms not voyage charter terms.

So when negotiating a time charter the two parties will need to agree at a delivery point for the ship. At first glance this may sound like a no brainer. The delivery should be at the first load port I hear you say.....but wait just one moment. Like a taxi cab most ships need to travel empty to the next load port....so the question is 'who pays for the empty ballast leg to the load port?'

Common sense may suggest that the shipowner should pay but the reality in most situations is that it is the charterer who usually foots this bill. Having said that the 'delivery point' of a vessel in any time charter negotiation is a MAJOR point of discussion and choice can come down to the prevailing market conditions at that particular time.

All charterers try and get APS delivery because that means they only start paying hire at the load port (ie arrival pilot station). All shipowners try and get dop delivery (dropping outward pilot station at last port of discharge - previous voyage) because it means the charterer pays from the moment the ship leaves the last discharging port of the previous contract.

You can see by this example why it is important for charterers to source ships as close as possible to their own loading port.......

The problem here is that most loading areas are not by defintion discharging areas. 99 percent of time charter contracts involve an empty ballast leg before the vessel picks up the next cargo...

There is so much more that can be written on this subject and I will add a few things as we go along. Any questions just drop me a line....

Or take a look at my one of a kind tutorial 

Voyage Estimation Tutorial

Back on deck

Hi All

Im back on deck.

The priority at the moment is to pull together the VS voyage extimator pack.

As we speak I have a 20 man crew of midget himalayan hiking computer nerds working 24/7 on some simple VS voyage estimating software. The software is basically the non spreadsheet equivalent of the voyage calculator that I have been using successfully for the past 12 years. No bells and whistles - just the basics to help any user run an effective voyage calculation with minimal fuss (and cost compred to what is on the market).

Think of my software are the base model of any swanky car. No heated seats, no gps, no mini bar etc - but a nice reliable engine, 4 good tires, and the ability to get you to your destination safely and accurately!

BTW - thanks to those of you who have sent me private emails over the last week or so. I have tried where possible to reply where I can.

Anyway back to my real job for a few days...

Yours
VS

check in

Hi all

Just thought I would stop and check in. Travelling / working / sightseeing with my family this week and next.

Met one or two interesting people which i can tell you about in the weeks to come.

Shipping markets remain uncommited. China has started holidays which means a drop in vlume. Congestion in Australian coal ports becomes a huge problem and strangles supply. In other words business as usual! As i tell clients - always expect problems....if s voyage runs smoothly then thank the man upstairs.

Will check in again soon.

Yours
VS

Shipbroker Traineee News

Headlines in Tradewinds Newspaper this week that Clarksons, the worlds largest shipbroker, has doubled the intake of international based trainees this financial year. The intake, compared to previous years has been maintained at head office in London but the international offices have seen a large expansion.

Well done Clarksons!

( I also note that in the same publication a disgruntled Clarksons employee, decided to leave a rather smelly parting gift on the 6th floor of their headoffice in London. I wonder if he had an Indian curry for lunch. Needless to say he no longer works at Clarksons. Yes people destitute behavious shows no financial or cultural boundaries - shipping can be a prime example).

The Virtual Shipbroker pointed out a few months ago that at the peak of the GFC, it would be an opportune time for a number of the bigger shops to let go of expensive fat cats and consider taking on trainees at a lower cost base. This certainly seems to have played out.

I also note that the job market in general is very good. Lots of news this week regarding the surge in 'Wall st' employment jobs and shipping is riding that same wave.

There has never been a better time to try and get your foot in the door.

Yours
VS

In deep s...t

Historical information you need to know about shipping Manure:

In the 16th and 17th centuries, everything had to be transported by ship. It was also before commercial fertilizer's invention, so large shipments of manure were common. It was shipped dry, because in dry form it weighed a lot less than when wet, but once water (at sea) hit it, it not only became heavier, but the process of fermentation began again, of which a by-product is methane gas. As the stuff was stored below decks in bundles you can see what could (and did) happen. Methane began to build up below decks, and the first time someone came below at night, with a lantern, BOOOOM!

Several ships were destroyed in this manner before it was determined just what was happening. After that, the bundles of manure were always stamped with the term," Ship High In Transit" which meant for the sailors to stow it high enough off the lower decks so that any water that came into the hold would not touch this volatile cargo and start the production of methane.

Thus evolved the term "S.H.I.T," which has come down through the centuries and is in use to this very day.

You probably did not know the true history of this word.

Neither did I.

I always thought it was a golf term.

Rgds
VS

The need for speed

I need to put something out there into 'cyberspace' for shipowners, freight traders, charterers and voyage cargo shipbrokers.

If you are presented with a piece of voyage business that needs to be evaluated / considered, quoted on etc, if you have not offered or replied to the customer within 2 hours you HAVE NOT done your job properly.

Consider this..

If you are a commodity based client - say a steel mill, and you need a freight rate asap and you contact a shipowner or freight trader etc - who will you give support to? A service provider that takes 3 days to reply or someone that can give you backing within 30 minutes?

Too many shipping people get caught up in the process rather than understanding the flow.

Shipping, commodity trading, freight trading is a TRADING environment, and if you snooze you lose. Some of your clients can win business on the basis that they can provide their customers with a quick freight solution. This is a fact!

I can hear a few of you already screaming that moving so quickly can be problematic and leave you open for mistakes. You will also point out that one needs to check port costs, restrictions etc etc...

Well I beg to differ. There is so much information ou there that being able to make quick decisions regarding freight prices should be easy.

If you cannot run a quick number ask yourself

1) Are you really prepared?
2) Can you actually run a quick and effective voyage calculation?
3) Have you kept previous calculations?
4) Do you have all the information at close quarters
4) Do you know how to submit a number and cover your butt with a suitable 'sub' clause
5) Do you know how to condition the client to give you feedback during the process that if the cargo does look like happening that you have time to sure up your numbers.
6) Do you fully appreciate that your clients business could very well hinge on the fact that they need "quick' service from clients..
7) Do you know how to factor in contingencies into you calc in order to protect you bottom line?
8) Do you have access to a colleague/mentor in order to check your numbers?
9) Do you have a good generic, market understanding of port costs / restrictions on various commodity trades and geographical regions?

If you answer yes to ALL the above then you my friend are a winner in whatever role you have in this crazy business we call international bulk shipping..

Have a nice day

Yours/VS

Voyage Calculation Website

Due to shortage of room on this blog I have started a separate website for voyage estimation / calculation information. I have some great ideas on how to make the website a really valuable tool for anyone interested in learning more about this skill.

http://voyage-estimator.blogspot.com/

Time Charter VS Voyage Charter

In the lead up to the availability of the VS voyage estimation pack, I want to discuss a few of the major concepts.

The main purpose of running a voyage estimation is for the user to try and work out the 'per metric tonne rate' for a particular piece of voyage cargo.

In general, when brokers, shipowners and charterers talk about the market, and when one reads market reports, what we are mostly discussing are 'Time charter rate' not Voyage rates. So you will hear and read commentary saying that such and such vessel was fixed at USD 20,000 per day for a time charter trip from Singapore to Europe. Thats all well and good if you want to know the time charter rates, but the figure of USD 20,000 per day means nothing for a cargo owner who wants to move his cargo on a voyage basis ie a per metric tonne rate.

What does USD 20,000 per day convert to on a per metric ton basis they scream...

So this is the main purpose of the voyage estimation - to convert this Time Charter Daily Hire Rate into a meaningful Per Metric Ton "voyage rate". Alternatively if the charterer has given his/her 'voyage ideas' the shipowner and broker can plug in the voyage rate in order to work out the breakeven time charter rate!

Wrap your minds around that - lucky its early in the week hey..

Any questions then give me a hoy!

PS - Not all market discussions are based on time charter. Some well know KEY markets are discussed using voyage rates. But these trades tend to be very generic and thus allow for easy voyage rate comparisons. Examples of well know voyage based markets include USG / Japan grains and South Africa / Europe Coal routes.

Yours
VS

Voyage estimating - dry bulk

Dear All

Due to popular demand I am currently putting together a work book of various voyage estimating examples (dry bulk) plus explaining the techniques and the art in calculating them effectively.

Running a ballpark voyage estimation is an incredibly important skill for any good broker. It is also a brilliant way to learn how your customer thinks. Voyage estimating is the cornerstone of how shipowners come up with their freight rates for any particular piece of voyage business.

Over 20 years in the business I have run thousands of voyage estimations. I have run them in my capacity as a shipowner, freight trader, shipbroker and charterer. For each, the aim is slightly different. No one knows this better than the Virtual Shipbroker.

All the tricks and assumptions will be revealed. Should be available over the next month or so.

A must for all brokers, freight traders, charterers and shipowners.

Yours
VS

Mixed signals

Is it just me or do others feel like they have played 5 sets of tennis after reading the financial news. In yesterdays local financial rag, page 3 covered 4 stories, each one presenting a new set of economic figures that could make any self respecting investor go completely mad!

In the red corner we hear that spending is up, stock markets are bouncing back, reserve bank governors are making appearances without bullet proof vests, and apparently the economic supecycle timeclock is just a tick past 8 pm. Good times baby!

In the blue corner we have gold reaching new highs, Chinese politicians and business leaders declaring they fear for the future, a baltic dry index in desperate need of an intravenus dose of Ben Johnson moose juice and a vessel forward order book that is making champaign bottle manufacturers beam with lofty expectation.

Maybe its always been this way and its only now that I know enough to know that I know nothing.

Time for bed

Regards
VS

The missing shipbroker - 1880

Not much has changed really.

http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9B01E2DF1F31EE3ABC4951DFB566838B699FDE

Shipbroker out late without his wife, drinks too much top shel vino with stevedore friend, decides to take public transport home (doesnt drink and drive good man), encounters some difficulty, never to be seen again.

Interesting that he often disappeared at short notice only to send his wife a telex the next day explaining he was called away on business. I tried that once and was told never to come back - so that much has changed in 130 years!

I wonder if his ultimate undoing was because like many brokers he had a penchant (spelling!) for flash suits and expensive jewelry. I am sure there is a lesson there somewhere!

Yours
VS

The science and the art of effective voyage calculations.

Dear all.

I am working towards a new voyage calculation/estimation resource. Keep an eye out for it in the near future!

Cheers
VS

Trade wars heat up!

On the back of china announcing last week a 25 percent drop in exports.....

By Mark Drajem
Sept. 11 (Bloomberg) -- President Barack Obama imposed tariffs starting at 35 percent on $1.8 billion of tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. trading partner.
The additional duties would last for three years, dropping in the second year to 30 percent and the third year to 25 percent, according to an administration statement today.
“This administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers,” U.S. Trade Representative Ron Kirk said in a statement. “Enforcing trade laws is key to maintaining an open and free trading system.”
The case is the largest so-called safeguard petition filed to protect U.S. producers from surging imports from China, and was a test of Obama’s approach to trade disputes. The steelworkers union, a key political ally of Obama, represents 15,000 employees at 13 tire plants in the U.S.
The independent U.S. International Trade Commission recommended that Obama impose duties for three years, starting at 55 percent. Tariffs that steep would effectively block imports of tires from China, Cooper Tire & Rubber Co., the second-largest U.S. tiremaker, said in a filing to the U.S. trade office.
All of the U.S. tire makers have operations in China, according to the ITC, and none of them publicly supported the steelworkers complaint. Goodyear Tire & Rubber Co., the largest U.S. tiremaker, stayed neutral.
‘Effective Relief’
Senate Majority Leader Harry Reid urged Obama in a letter this month to provide “effective relief” for the tire companies, saying action is necessary if Congress is to approve new trade deals in the future.
“This is going to be a test, not just for the president but for this administration,” United Steelworkers President Leo Gerard said in an interview before the announcement. “If they can’t enforce this, how can Congress ever trust them with any other trade deal?”
Chinese officials and a lobbying group for multinational companies such as Caterpillar Inc., Citigroup Inc. and Microsoft Corp. have urged Obama to refrain from curbing imports, saying it could lead to a “downward protectionist spiral.”
Former President George W. Bush turned down each of the four requests for such trade safeguards in other industries, saying they would do more harm than good to the U.S. economy. Obama pledged during the election campaign to take a harder line against Chinese trade barriers, and said he would assess these safeguard cases on their merits.
Since taking office Obama has vowed to avoid any new protectionist measures.
To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net Last Updated: September 11, 2009 21:36 EDT

What the?

My website hit counter has just gone haywire and dropped back by 7,000 hits. The counter on the books for sale website has gone from 3,000 hits to 12,000.......

mmm - technology hey!

Support for the blog!

If you are a long time reader why not become a follower? Go on I dare you!

By the way...when I get a chance (shortly) I will be posting an example of how to do a basic voyage calculation (estimation) - the old fashioned long hand way...

Yours
VS

Interesting times in world shipping

Theres lots of things happening out there in the big wide world of finance, commodities and shipping markets.

Interesting state of play. It seems that the worlds economies have staved of the next great depression. The stimulus packagaes have worked and the bottom line is that the worlds credit markets are crawling out of hiding ready to play ball once again.

If we cast our minds back to the early 1930's (I know some of you were there!) the most notable reason given for the great depression was that panic led to protectionism - protectionism based fear meant the financial markets tightened and credit dried up - this led to a masisve snoball effect and the world shut up shop!

So the key to the current climate has been that the stimulus has been linked to freeing the credit markets - and thus the good position we seem to be in now!

BUT BUT BUT - have we won on a technicality? Are the fundemantal problems still there?

ie
1. Too much debt
2. Bad financial corporate governance
3. Asset bubbles

Who knows? The financial markets are much different entities then they once were so historical economic ratios (of value and risk) have been turned on there heads.

Its a bit like the the 100 meter world record currently held by Usain Bolt. In 1916 the worlds fastest time was 10.6 seconds. 1960 became 10 seconds and now Usain canters in at 9.58 seconds. Whilst nothing appears to have changed over that time ie 1 man - 100 meters - run like the wind, things have changed. Training techniques, the size of athletes, the growth in world populations, the emergence of African nations as superior fast twitch athletes etc etc...

Same with market economies. Nothing stays the same and what we though unachievable 60 years ago may be achievable now and that includes the new world economy based alot on credit, derivatives, and the ease by which nations can trade.

The backdrop of this is what seems to be our declining physical environment. We all need to be diligent and the shipping community has been a little slow in reacting to climate change and co2 emmissions.

Shipping sofar is not part of the kyoto protocol but movement is afoot to rectify this.

Check out this interesting article from last years "daily telegraph" for a greater explanation of the issues that the shipping fraternity face.

http://www.telegraph.co.uk/earth/3347807/Shipping-The-greening-of-the-ocean-waves.html

Yours
VS

Shipbroker employment - this week!

I wonder if anyone else has noticed the jump in commercial shipbroking and chartering jobs recently? If you surf the job section of my website this is fairly self evident.

The word on the ground certainly backs this up.

A few months ago there was lots of fear within the shipping community. Firms culled employees and implemented hiring and wage freezes.

But the good news is that the economic landscape seems to have changed (for the good). The worlds governments went 'stimulus crazy' and now all major markets have staged some sort of recovery.

Firms are hiring, no one is firing and people are jumping ship for better paid positions.

Smooth seas ahead they yell! But for how long no one really knows?

Good luck to the job hunters!

Yours
VS

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

Shipowning - a wonderful business

Ok time to discuss some of the wonderful aspects of working (being) a shipowner and freight trader.

Having effective commercial control of an asset worth up to usd 200 million dollars is an intoxicating idea. Having control of 50 of these animals is even more thrilling.

A shipbroker working as a shipowner is the decisison maker. Sure you will have management to run things past but at the end of the day the decisison of where to send these goliaths of the sea, is made by the inhouse shipbroker.

Think about this for a minute

- The vessel is probably worth millions of dollars and has taken 3-4 years for a shipyard to build.
- Some vessel are six stories high and the lenth of 3 football pitches
- Your commercial decisions directly effect the life of bewteen 20 -30 people onboard the ship. The master and his crew are your effective servants for the passgae of each voyage, and YOU will decide where they spend Christmans, birthdays and religious holidays.
- The cargo you have agreed to carry (by way of negotiation) is also worth millions of dollars. Once the Bill of Lading has been signed, the shipowner takes effective control of the precious cargo. You need to make sure the cargo arrives safely. Big responsibility!
- Grains feed nations, coal, iron ore and oil power nations, the list goes on.

As a shipowner it is sometime easy to lose sight of the bigger picture. Cargoes and terms are merely words on a recap of the deal done. The master and his crew are only given cursory thought when a crew list is passed down the line to the charterer. The vessel itself may never have eyes set on it by management and the broker making its every decision.

When I was a shipowner (freight trader), on occassion I would sit back and consider the amazing system that was at work for which I was lucky to be an important part. Great job if you can get it!

Yours
VS

Whats happening up top..

In the previous post I duscussed the fact that quite a few ship operators have gone bankrupt over recent months.

People will blame market conditions and argue that the GFC was not foreseen. But in reality this is far from the truth.

Wall St type mentalities are alive and well in shipping and those with the knowledge and the connections know how to play the game. For many a reckless shipping entrepreneur out there they realise the game is about 'access to other people money'. In boom times they get this access and in droves. They then surround themselves with middle management and strcutures that resemble a working business entity BUT then all they do is bet the money on BLACK.

Let me explain a bit better. When you have a ship full of other people money, and if you structure your company in the right way, you have very little to lose and a huge amount to gain.

Betting on black may mean betting on a market rise and hence going long on ships. Or you might bet the other way. if you win you are set for life and if you lose then you wind the operation up, go surfing and re-emerge with a new brand name. Not only are they able to re-emerge but senior execs have also orchestrated massive payouts from the sinking entity that they once controlled.

Over the last few months we have seen some senior shipowning execs re-emerge in this light - seeminlgy unscathed by previous poor and reckless business decisions - only to find new backers willing to fund the whole 'game' once again.

Dont worry - shipping companies are by and large fine upstanding members of the international community and have people at the helm making reasonable, cautious and long term decisisons based on more than next years bonus pools.

Yours
VS

"Who you calling a shipowner!"

Here is the thing about shipowning. The term can mean many things.

For a charterer, the term shipowner, means the charterers counterparty in any freight transaction. So this is the company who provides a ship at the right place at the right time.

Many charterers who are not that ofay with the world of shipping, presume that anyone who provides a ship must be a pure 'shipowner' and thus have easily caluclated fixed costs and required rates of return.

That is why in high freight markets you hear charterers crying foul of the filthy greedy shipowners.

Unfortunately for the unitiniated this only tells part of the story. Yes in high markets some shipowners (pure ones, for example) will benefit from raised asset prices and increased freight rates. But more often than not they will be facing the same market conditions as the charterer.

Ask yourself the question - How then have we seen in such a freight bubble some 'shipowners' go bankrupt?

Answer - because most shipowners are not 'shipowners'. They are 'ship operators' and 'freight traders'. These guys dont own ships, they lease ships for long periods and then re-lease the ships at shorter period trying to make a margin.

If the market rises or falls dramatically and they have the wrong mix of ships and cargoes then they can go bankrupt.

So unlike pure shipowners who are interested in long term returns and growth, these guys are mainly concerned with short and medium time frames. Cashflow becomes very important.

Ship operators / Freight traders (different terms for the same type of firm) need to be experts, and within the wider market are often the smartest guys on the blcok - because they have to be!
No resting on laurels here, they need to know the market at all times and they need to be great negotiators. They will sniff out a victim accross a dodgy vindaloo any day of the week.

This is where a good broker adds value. Many charterers THINK they are saving money by cutting out brokerage and attempting to deal direct with shipowners, freight traders and the like. If the charterers are not shipping experts then this is a very bad move indeed.

Any good freight trader, after being approached direct by some unsuspecting cargo player, will automatically raise freight rates, and negotiate favourable terms, if they feel they can get away with it.

Sounds a bit complicated - shoot with any questions if you have them

Yours
VS

The mysterious world of bulk shipowning

So here is the first of a new series dedictaed to the world of bulk carrier shipowning. Beneath the docile, lumbering appearance of a super huge cargo carriers is a world of surprising color and complexity.

Lets start with calrifying some major concepts.

Its easy to imagine that as a cargo owner that needs his/her goods to be moved, there is out there a series of pure shipowners ready to offer you a service. By pure shipowners i mean someone who has bought a ship and now manages the ship in every transaction that takes place.

Truth: As a cargo owner (charterer) the likelyhood that you will have as your direct counterparty the pure shipowner is very small.

Here is a more likely scenario....

- Shipyard received an order to build a particlar ship.
- Shipyard agrees to build said ship for USD 100 million dollars
- For delivery in 3 years
- The buyer (company A) at this moment is the potential shipowner
- The buyer could be any large organisation with access to funds and an interest in shipping.
- Once the ship is finished and delivered this buyer is now a shipowner.

However

- 1 year prior to delivery, the buyer (company A) decides he has no interest in managing and operating the ship. Campany A also recognises that the book price of the ship (as yet undelivered) has risen quite alot (120 million) due to demand from china and india for raw Materials

- Company A sells the ship to Company B for 120 million - one year prior to the vessel being delivered.

- Company B is happy to pay the price because they are a hedge fund who would like to have some hard assets that will generate an income

- Company B however does not have any interest in operating the ship. they are a hedge fund and have no shipping expertise.

- Company B then enters into a 10 year lease relationship with Company C and thus locks in charter income for ten years.

- Company C are a large shipmangement company who have 60 other ships on their books with similar lease relationships. Company C do not like investing millions in purchasing ships outright and prefer to enter into these long term lease arrangement instead.

- Company C insists on a 'purchase option' on completion of 10 years service at an agreed price. Company B is happy to agree as they can now lock in their entire exposure.

- 3 years gone and vessel finally delivers - Grand opening and there is a cast of thousands to break the bottle of champaign on the hull of 'MV make me millions'.

- For the vessels first employment Company C takes the opportunity of a high long period market to charter the vessel to Company D for 3 years. Company C locks in a nice 3 year profit and Company D now has a nice ship to complement thier burgeoining fleet...

- and it goes on and on and on....

As a charterer there are occassions when you think you give your cargo to a 'shipowner' and infact you are merely giving the cargo to a 'disponent shipowner' and the real (head) owner is a long way down the chain. This is both necessary (for the wider industry) but problematic for charterers as the longer the chain is, getting important documentational, legal and operational matters sorted in a timely manner becomes increasingly hard.

Hopefully after reading the above a few times the world of shipowning, and its structures, start to make a little more sense.

I will elaborate and open a few more ideas over the coming weeks. If anyone has any specific question feel free to drop me an email.

Yours
VS

Momentum!

I just wanted to extend my encouragement to a number of you who have been emailing me privately regarding taking action on your shipchartering dreams.

Great stuff!

A few of you have been lucky enough to find employment with shipbroking firms in areas such as Sale and purchase, tankers and cargo chartering. A number of you have also started companies and websites. Some are leveraging of the contacts and knowledge of friends and family.

Well done and drop me a line now and then to let me know how you are going.

For anyone who send me an email all correspondence is kept strictly private and confidential.

Yours
VS

Shipping broker - the many hats

Hi All - Back from a short break.

In both the blog and the books I discuss the fact that shipbroking is the 'industry label' that can be attached to the wider proffession of 'ship chartering professionals'.

So apart from shipbrokers, we also have tramp ship owners, bulk ship charterers and freight traders. The core set of skills are interchangeable.

So to those of you who have sent me private emails wondering if my books (inside shipbroking, Fast track and the List) are suitable material for those wanting to be shipowners and charterers - the answer is a definite YES.

With this idea in mind I will spend the next few weeks writing more about shipowning, cargo chartering and freight trading. The vocations are in many ways more interesting than pure shipbroking - pros and cons for both.

I also wanted to say a quick word about the terrorist bombings in Jakarta Indonesia. There are a number of bulk shipping related fiorms situated within a short distance of both the Marriott and the Ritz Carlton. Both Hotels are a regular choice for the international trading and shipping communities.

We send our thoughts to those, who without fault of their own, found themselves involved in this tragedy. Lets hope for safer times ahead.

Yours
VS

How to stop shipowners and charterers going direct!

Especially after you are the poor unsuspecting soul who has made the introduction!

This great question was posed by MK a few days back and I promised to answer this on a new post.

Harsh truth - this happens everyday and is an extremely annoying part fo a brokers life. Having said that (yes there is always a BUT) a 'Fixing Machine' will avoid this scenario more often then your Mr Average broker.

Why is it inevitable? Few reasons

1) Power. Some principals love this game. No greater show of power than to cut out the broker and let them know about it.
2) Bad service. Sometime the broker has themselves to blame
3) Ease. The principals may become friends, start socialising and sending eachother business related emails.
4) Principal strategy. Quite legitimatley some clients want to keep deals secret and the best way to do this is to not quote brokers.
5) Principal policy. Some large charterers have a policy that for COA's all deals should be done direct.
6) Lack of foresight and appreciatuion on behalf of the principal. In line with the policy principal above many clients fail to adequately 'consider' the ramifications of going direct.
- ie annoying some pwerful brokers
- failing to see that in many cases the brokers actually add value (alot more than the price of commissions)
- Failure to understand that local broking communities need the ongoing support of local principals to keep the industry alive and competative.

Ok - So how to try and stop principals going direct...

In no particlar order

1) Dont introduce them!
2) Always be there together in any meetings
3) Work for a shipbroking company that has power. They will be less likely to cut you out if they are scared of ramifications
4) target clients that arent power hungry sociopaths. In not kidding. Long term succes depends on solid long term relationships. Remember what you were told at school - pick your friends carefully. Many brokers align themselves with the wrong people and it can turn ugly!
5) Spend time actively thinking about how to build loyalty into your relationships. Become friends and condition clients in everyday conversations that going direct is not the right thing

and the number 1 way

6) be good at you job. Always be looking to add value and give them no reason to cut you out of the deal!

Mk - I hope this helps

Happy multiple fixining!

Yours
VS

For shipbrokers out there!

I have to say, after going through my 700 th email of the day - if you are a shipbroker please do the industry a favour stop sending cargo orders without customer account names and without full disclosure regarding commissions.

If you are wondering why no one is replying to your ciculations this is more than likely the reason. Plus you are clogging up the email sytems of legitimate brokers and principals.

The first thing a shipowner looks for from a brokers quote is legitimacy. If all your quotes seem to be shredded in secrecy then the only reasonable explanation is that 1. you are not direct and 2. you do not have authority from the charterer to be quoting these cargoes.

The only reason a broker should/might quote a cargo without a clients name is if the broker is exclsuive for that cargo / account, and therefore is trying to protect himself/cleint from attack from other brokers. This exclusivity also needs to be pointed out in the email.

Happy Fixing

Yours
(a frustrated) VS

Daily BDI updates

Busy day. New initiative on the right hand side column there is now a link to the Wikinvest shipping market page. Take a look to see what is happening in real time to the bulk shipping markets.

Yours
VS

Shipbroker / chartering job

Good news - it seems my call to managers of shipping companies out there has not gone totally unnoticed

I have a possible position for either an experienced chartering person or a trainee. The company is in North America but the person can work from anywhere.

So that it is sure - I am NOT taking any commissions here and I have no interest in the company involved - I will merely pass on the information. The job information will be sent to all people on my mailing list (ie those who have bought one of my books).

For those on the mailing list keep an eye on your email shorty.

And many thanks to this shipping company manager for making this opportunity available to readers of this site.

Best regards
Virtual Shipbroker

Alain De Botton and the Virtual Shipbroker

" How ignorant most of us are by contrast, surrounded by machines and processes of which we have only the loosest grasp, we know nothing of gantry cranes and iron-ore bulk carriers, who register the economy only as a set of numbers, who have avoided close study of switch gears and wheat storage and spare ourselves closer aquantance with the manufacturing protocols for tensile steel cable. How much we might learn from the men at the end of a pier on the edges of London. They Inspired this book."

Alain De Botton (philosopher) 'The pleasures and sorrows of work' page 29 - Penguin Books 2009

++

Here is a great story - keep reading!

Only last week I read this book, 'the Pleasures and Sorrows of Work' from the world renowned London based popular philosopher / essayist Alain De Botton. Some weeks before I had downloaded onto my ipod one of his other books 'the art of travel'. What jumps out in both pieces of writing is the authors more than apparent interest in the mysteries and romance of Shipping.

With incredible wit, drama and insight he manages to take the human condition and apply it to the everyday lives of people like you and me.

He has written several books, written and appeared in several television programmes and recently co founded a new educational establishment in Central London called the school of life.

check out his website on http://www.alaindebotton.com/

So here is the great news. Having read a number of his books (and watched his tv shows - i am a true fan) and noticing the interest in shipping I took the opportunity to send Mr De Botton an email in praise of his writing and asking about his interest in shipping.

Like any good broker I also took the opportunity to mention my Blog and my vain attempt at the occassional bit of amateur philosophical intercourse.

Guess what! To my great surpirse he answered my email......

Here is his reply

Qte

Dear VS

I love your blog and its underlying philosophy of life (wise, wry, sceptical). Thank you so much for reading my book - and I wish i could have met you during its writing so as to be able to benefit from your insights. You perfectly fulfill my idea of a modern model human who combines the active and contemplative life.

With very good wishes

Alain De Botton (Monday 6th July 2009)

Unquote


So there you have it everyone. My head is huge. If my nonsensicle rantings are good enough for the wonderful Alain De Botton then your patronage of this website has been well worth the risk!

In all seriousness though, a huge thank you the Alain for taking the time to read the blog and reply with such humour, to the email of a starry eyed fan.

There is a nice moral here aswell. Never be afraid to send emails and ask questions - you never know who might reply!

Your
VS

Apology

I would just like to offer my heartfelt apologies for all the spelling errors in my blog and books (now and in the future)! Blogs dont offer spell checks and I just spit this stuff out without checking my own writing. Sorry!

Cheers
VS

Shipbroking platforms - update

In a previous post I mentioned that the absence of any obvious and real revenue streams led me to the conclusion that the only use for these platforms is to provide some other supposedly unrelated company with "lead generation'.

The process being that someone gives the webbased company the details of a ship and cargo for sale in the understanding that there would be other counterparties with whom they can contract. And then unbeknownst to them 'out of the blue' a supposedly unrelated shipbroking company gives the client a phone call and offers them a service. The problem here is that the supposedly unrelated shipbroking company is also the owner of the 'unrelated' webpage but does not declare this anywhere or even admit this down the track.

A bit sneaky and I have become aware that this is infact the modus operandi for atelast two of these websites.

So buyer beware - when you are joing any of these websites what you are infact doing, on many occassion, is merely providing a 'shipping entrepreneur' with your contact details and paying for the privilege. Do not expect to be fixing ships in the way that the websites portrays.

Yours
Virtual Shipbroker