BDI continued (answers added)

Ok - here is a disclaimer. I am not a shipping derivatives expert. Having said that I know enuf to make me dangerous.



Anyone feel free to chip in

Ok - one for all you lazy sods - have a shot at answering!

Thanks for the post Tom!

Tom said...


To all who may know the answers...

Excellent - a thread on the BDI. I am currently trying to get into the Shipbroking industry and have a million questions about... well... just about everything! This seems like the ideal time to get a few away about the BDI... I hope they aren't too stupid:

1 - Is there a Baltic Wet Index or a Baltic Container Index? If so, why don't I hear about them?

There are dry and wet indexes. If you were active in the tanker market you would refer to these all the time.
Not sure about containers.

The world loves the BDI - some traders even call it the 'bady'. It has a ring that gets people excited.

2 - BDI is often referred to as a "leading indicator of economic activity". How can it really be that if the index is depressed by the supply of ships, rather than the implied reduction of global demand for raw materials?

Yes you are right. Having said that the supply of ships is also refelcted in the global demand for raw materials. Its a delayed reaction but there is a correlation.

There is no perfect indicator of future economic conditions. The BDI is seen as being excellent because it represents what is actually being shipped at any given period of time. For it to be shipped it must have been bought and sold and for it to be bought and sold it must have been produced.
3 - Why aren't commodity prices themselves not considered a better 'leading indicator of economic activity'? Presumably FFAs influence the BDI in just the same way as futures obscure commodity indices (see next question)?

Commodity prices are based on FOB prices and do not take into account shipping. The difference is that shipping is one further step along the process.
4 - Does the BDI factor in FFA prices?

Yes the BDI is the index.

5 - If so much of Dry Shipping is dependent on China, is the BDI really more of a measure of Chinese economic strength relative to other leading economies?

Yes - China is pulling the strings for the entire world economy.
6 - Are all FFAs priced against the BDI? What about FFA specifically related to Tankers and Containers (I realise the latter are very new)?

Have you checked out the Baltic Exchange website? That will tell you how it all works!

Few points - THE BDI is not a perfect indicator for a few reasons...
1. Doesnt take into account huge supply issues such as port congestion.
2. Can be manipulated through stockpiling and better storage.
3. Is subject to manipulation through trading techniques.
4. Currently heavily dependant on the supply of ships which has nothing to do with current demand (time lag).
I look forward to some kind soul putting me out of my misery.

Thank you VS - Inside Shipbroking was indeed a fantastic start and I regularly visit this site to read your posts and use your news links. Please keep up the good work.

April 28, 2010 5:58 AM

unqte

Nice message

To my private email

Qte

Dear Mr Viritualshipbroker


I must first of all thank you for a superb blog; in fact, it is the only blog I actually read. Your topics regarding broker commission, hints and tricks of negotiations and other ways of modern survival skills for the every day broker are very useful.

I have bought and read your books and as a result of this I today run my own ship broking company located in northern Europe................(he goes on to ask me some questions and asks for his name not to be used which I respect)

++

This person has created a nice shipbroking firm operating in a niche segment. A very nice websit aswell.

Congratulations and here is hoping for further success in the future.

cheers
VS

Questions about the BDI

Seeing though he asked so nicely

Qte

Hi VS,

I am one of your many e-book buyers.(not sure if you believe it or not, I can provide proof)

Since you are the best online GURU ( "massage the ego,applicable to all industries"sounds familiar =D ), hope you can clear some doubts of mine:

1) The BDI is an indicator of the actual market activity. Is it a real-time moving index like the Dow Jones? What time is it being release? which country's clock does it follow?

(I believe its London time around midday)

2) If the BDI is up , is it likely that big bulk carriers stocks will go up as well?

(Yes good assumption)

3) I saw some bulk carrier (BC) stocks e.g DRYS & EXM in US reaching sky high price in 2007. Is it gonna to happen again or will it even get to one-third of its peak in 2 years time?

(wont reach 2007 highs for a long long time)

4) How do you see the BDI in 2-3 years time? Is it a good choice to go long for bulk carrier stocks? If it is ,which are the ones you are familiar with or better still you have insider info of ( just joking).

(I am bearish on shipping stocks due to the massive amount of new ships coming into the market)

A lengthy email indeed, please take your time to answer ( really hope u do as it would proof that you are a nice guy=)

Regards,
Mr Singapore 2010

(You are welcome - wax on/wax off)

Shipbroker Salary update

Every few years the chartering employment market goes through a period of consolidation. We are in the middle of one now.

Most firms have emerged post gfc in fairly good shape and the market is reasonably bouyant. As a consequence we are seeing people move from shop to shop and from desk to desk. People are leaving jobs in search of better pay and conditions. Companies are once again clamouring for the best available talent.

The losers have been the firms that have been slow to react to this new bouyant climate. Last years corporate policies dont fit todays market realities.

This will settle down soon imo.

There is still a huge shortage of experienced well perfornmed chartering people.

++

The new packages for senior chartering execs (fixing machines) in places like Singapore, Switzerland, Dubai and Hong Kong are getting up towards the 350-450k per year mark (all inclusive incl accom, bonus etc). Up 30-50 percent from say 3 years ago.

Good money in anyones language.

Cheers
VS

Anyone need a shipping/chartering consultant?

A side project of mine

qte

We retained VS's consultant services for shipping related projects in our trading company. Although we have a small traffic department, through VS's services, our company was able to negotiate with utmost confidence. The deals were closed within the expected timeframe and under budget. Beyond this, VS's consultancy allowed my company to "catch" business opportunities that would have been beyond our reach otherwise.

Among the main benefits of VS's services, is to be able to tap into expertise that would have taken the company years or lots of money to achieve. Saving us from a lengthy and costly learning curve, allowed
us to take advantage of business opportunities that were usually exploited by other biz partners (suppliers, etc). Its like having our own shipping department with minimal overhead.

VS's consultancy services allowed us to:

1) Close deals which have brought in business and profit.
2) Negotiate terms with much confidence and expertise allowing us to increase initially forecast income by an average 35%.
3) Saved us countless hours and legal fees.
4) Was crucial in maintaining a swift pace in negotiations and structuring the contracts in a safe and commercially sound way.
5) to work multiple contracts without any major disputes and helped us keep minor issues, well…minor.
6) Make repeat business with our business partners by creating momentum and strengthening the company's commercial standing.
7) Profit from several business opportunities
related to main business but previously undetected.

Although most praise in my company came from VS's direct increase to our bottom line, I believe that seldom real business success is in the size of the deal or the "closing price". In my experience, the real money is made or lost in the negotiation and the architecture of the biz, long before any money exchanges hands. VS's consultancy services provided increased profitability but also provided us with intangibles that will remain with the company for years to come. We are extremely satisfied to have contracted VS consultant services and will remain doing so in the future.

==

Cheers
Alex l.
(full contact / email reference available)
++

For full details on how it works / costs etc drop me a line at virtualshipbroker@yahoo.com

Dry and Wet shipbroker trainee spots

click here for Trainee position in athens

A message from a Chinese (mainland) reader

shuai said...


Hi VS,

I have a couple questions about shipbroker career and hope you could kindly share your insight.

Im in the 2rd year of my Uni in China.You know,China is growing to be stronger and stronger in ship market.According to the nation`policy, think Shanghai is doomed to turn into marine center.So the demand of shipbrokers is huge.I want to be a shipbroker.then what can I do as a Uni student?

April 7, 2010 5:36 PM

++
 
Hello Shuai
 
Shanghai and Beijing are both major chartering centres (these days). I visit both often.
 
If is was in your position I would look for a good 'maritime degree' and also try and complete the ICS shipbroking exams.
 
The fact that you already have good written English is a excellent start for becoming a shipbroker. China is indeed booming and an exciting place to be.
 
Try reading 'Inside Shipbroking' where I give some excellent tips for on how to leverage your time at university.
 
Hope this helps
 
Cheers
VS

shipbroker trainee thread

Has has 63 replies - easily the favorite thread.

Lats few posts I will attempt to answer

Hi there,


I'm a near graduate student from Turkey, northwestern side. It is also being completed, which I'm studying during 5 years inside and finallly will become a oceangoing officer. But, sure that in this time of globalling, it is a compulsory to do something more. I decide to learn a language more, different from German, Turkish and British also. And aslo wondering which language is better to known in shipbroking sector different from those. Lookin' help.

B/Rgrds
Egemen



April 7, 2010 1:30 PM

Anonymous said...

Dear VS

Firstly, congratulations on an excellent blog!

Secondly, I have been selected for the first stage of interviews for a Graduate Scheme for a leading shipbroking company. I have a BSc in Maritime Business and Maritime Law, and currently studying to obtain a Masters degree.

I am asking whether you have any advice for anybody preparing for an interview? Or any idea of what sort of questions are likely to be asked? I have already messed up a telephone interview with another leading firm, and really don't want to mess up again!

Thanks for your time, and once again excellent blog!
Regards.
April 7, 2010 4:13 PM

++
 
Dear Egemen
 
Thanks for the message. You already know German, Turkish and English - well done.
 
FYG - I only know one language and its called "poorly written English"!
 
That should answer your question. Language is important but there are lots of better ways to spend your time IF the reason you are learning languages is to land a chartering job.
 
Try the ICS exams and my books. That will save you years.
 
If you are intent on learning an emerging shipping language 'Bhutanese' is making a late charge!
 
+++
 
 
Hello Anon - good luck with your interview. One piece of advice - don't tell them you are studying for a masters!. Im only half joking. Although study is very important most shipbrokers have little is any formal education - remember brokers historically come from a long line of academically challenged, spoilt, rich kids.
 
This is offcourse changing and more brokers come with degrees attached. But I need to emphasise the point. Dont play up to your academic prowess. More important will be how they perceive your drive and willingness to do what it takes to be a fixing machine.
 
Check out 'inside shipbroking' where I reveal some of the traits that employers look for.
 
Best of luck
VS

Smart Chartering - Negotiation

IMO a good negotiation is a quick one. Not only should it be quick but the outcome should be inline with your goals.

The problem with a drawn out negotiation is that it is inefficient. More time means more propensity for the negotiation to break down.

So here is my tip for chartrerers and for those brokers advising charterers:

1. Have a "proforma" offer / bid sheet with your standard terms ready to go. This bid sheet should have all the terms and clauses that you want included in the final contract.

2. Then when asking for offers state the following - "charterers will only consider offers at charterers terms"...

This way shipowners will run calculations basis charterers terms and not waste time trying to negotiate the periphery terms and conditions.

3. Same with the charterparty. Simply state the following at the end of the 'proforma' bid sheet - "otherwise as per charterers proforma. Proforma available for perusal on first counter".

Before long the marlet (shipowners) will come to understand that your (the charterers) terms are not negotiable and will only offer basis freight rate.

Following these simple rules will save you heaps of time and maybe even millions of dollars!

Cheers
VS
(ps - there are occassions where a long negotiation can play in your favour - but not often!)

On vacation

To all those who have yet to receive a reply from me re various emails and topics - sorry im on vacation. Back next week.

Cheers
VS