Happy Festive Season

Taking the opportunity to wish everyone a happy festive season. I wont say Merry Christmas because we have people of all faiths who read this blog.

The lead up to xmas is hectic. No one wants an open ship or open cargo in the period between xmas day and the new year. And if they do we pity the poor trainee, or infact the older warhorse, who has drawn the short straw and must man the phones and computers during this period.

Those of us with school age children have the perfect excuse to recharge our batteries, contemplate the year that was, and get in some fishing, skiing, surfing or spot of golf (depending where you live).



my wife loves dressing for xmas!

Thank you to all those people who have supported this blog in its first full year of existence. Its strange being a blogger - im not sure exactly what keeps me going being so busy in all aspects of my life. I think its the feedback that get from happy readers and students that fires me up. In shipping we dont tend to get such positive feedback on such a regular basis. You might get a pat on the back here and there and a bonus for producing revenues above expectations - but i can safely say there is nothing quite like someone telling you that you have made a positive impact on their lives by guiding them through the maze that is international shipping.


I get just as much buzz from selling a 30 buck book as i do from doing a deal worth 15k commission. (Selling a book is still someway behind conculding a coa or doing a nice 5 year period deal - but not much which may surprise many of you).

I look forward to helping others in 2011 and beyond (agw, wp).

Stay happy and safe over christmas

Click here for the latest wikileaks christmas scandal.

ciao for now

VS

A cool way of looking at things

Time management is an important part of any shipbrokers life. So anytime used not trying to 'close deals' can be a moment wasted.

Here's a cool way I like to think about the negotiation process - and thus manage my time better.

You can use it too

Lets say you have a close client who is a charterer and this charterer uses 5 shipbrokers.

When you receive a new charter order you have

1. A 20 percent chance of doing a FIXTURE (one out of five brokers)

2. When you receive an indication from an owner this percentage (i reckon) goes up to 30 percent chance of doing a FIXTURE. (an Indication is a big deal. But other brokers will also be bringing in a few indications)

3. If you receive an offer from a shipowner I suggest that your chances of doing this FIXTURE go up to say 40 percent. (A broker needs to treat offers very seriously. This means you are getting closer to being in the money!)

4. If you get a counter offer (from the charterer) - then this percentage goes up again to say 70 percent. (yes a counter offer improves your chances by a huge percentage. It means the two parties are now actively involved in a trade and have invested time and effort to take this further).

5. You are fixed on "main terms" (yahooooooooooo!!!!!!!). This means that you have agreed all the main points - but is this time to start popping the champagne? No you are still only 90 percent there.

6. Main terms subjects are lifted (Yahoo.!!!!!!!!!!!!!!!!!) - 98 percent (you still have the charterparty to negotiate!)

7. Fixed clean - now you can relax - the deal is complete - well almost anyway. Even when you are fixed clean there is a 1 percent chance that the shipment will not happen. Force Majeur, counterparties walking away from contracts, ships sinking, companies going bankrupt, collissions etc etc - all can happen.

What does this mean? It means you must prioritise your time. When you receive an offer from a client this is more important then sending around an order from another client. If you are in the middle of a negotiation and someone asks you to play golf - what do you say?

Check out this diagram

Play it smart - use your time wisely - and watch your bank account grow.

Cheers
VS

True Story

A magician was once employed by a the old Armada bulk to entertain the crew during long sea passages. It was paid for with the money recieved from the 1,500 CVE the headowner would negotiate in any time charter deal.

Interestingly for the magician, the captain just happened to own a parrot (fun ship to be crew) which always insisted on being part of the acts put on by the magician. He would perch on the edge of the small stage and screech, "He does it with a mirror" or "Hes got it up his sleeve."

The magician was furious, but since the bird was a favorite with the captain and he was anxious to retain his position for future voyages, he maintained an angry silence.

One evening as the magician worked, the parrot continued to harass the unfortunate man. Sadly the ship ran into a mine which had become detached from the sea floor after a storm. The explosion tore the bow off the ship which sank within a few minutes. Amid the wreckage and the lifeboats, the magician sat on one end of a table from the captains private dining room. At the other end sat the parrot, dirty and disheveled, his feathers caked with f uel oil. For some time they eyed each other malevolently saying nothing.

Finally the parrot shook himself and advanced across the table. He fixed the magician with a beady eye.

"Okay, I give up," he squawked. "What did you do with the ship?"

++

He wasnt the only magician working at Armanda in those days. You should have seen the chartering department! (boom boom tish - Im sure I could write for Letterman)

VS

If in doubt - pass it on!

A golden rule for negotiations - especially if English is not your first language. If as a broker you are unsure regarding the meaning of a certain sentence, word or term - dont try and interpret it yourself. Go back to your principal and ask them for clarification. The other thing is this - as a broker you may not understand the meaning of everything, but there is every chance that the person you are representing does. So if in doubt - just pass on the message making no changes and without adding your interprative comments. This will save you time and angst.

Let me put this another way - I often see brokers get into trouble by trying to priovide a commentary on something they dont understand. Keep it simple and stay out of trouble. A brokers job is not to be clever. A brokers job is to get a deal done quickly and easily - full stop!

Ever heard of the KISS principle?

Cheers/VS

Whats with Address Commissions?

BUMP

suraz said...



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


November 30, 2010 7:20 AM

++

Jean Paul said...


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


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


December 05, 2010 9.00 PM

++

Yes Address Commissions (adcom) are a bit curious. Click HERE for my thorough explanation.

I guess the question here is why do address commissions differ so much: - Some charterers don't charge any adcom. some charge the price of a standard brokerage (1.25 pct), most charge either 2.5 adcom or 3.75 adcom and some even charge 4.25 percent and more!

The other question is - why would a charterer charge such a high adcom when in reality this extra cost to the shipowner will be reflected in the freight rate?

JP and Suraz are both right - mindset certainly does play a part!

So here is my take on the matter. Most charterers don't really know why they charge a certain adcom. The amount they charge will depend on the advice given to them by brokers, what their competitors may charge and if they are more sophisticated by what their accounts department also think they should charge to cover the cost of their shipping departments.

There is one other reason - and I think this last reason explains the randomness best. The most savvy charterers realise that sometimes by charging a high adcom - they make free money.

Big call? let me explain - imo the charterers who do charge a high adcom are clever. Here is the reason. Logic will say that when a shipowner does a voyage calculation the adcom is just another cost - so the higher the adcom the higher the freight rate. So if all shipowners are in the same boat (all are being charged the same adcom) then the playing field is even and no one really loses.

But consider this. When you read a market report - do you notice something that is invariably missing?

Eg you might see 50,000 hss USG / Japan scale bends USD 23.00 pmt

What is missing? Yes the commission structure!

When you see a TC market report like this

MV Maria Botto 75,300 dwt pan 86 dely Gib spot tct via USG to med USD 60,000 pd

What is missing? Yes the commission structure!

Its an important aspect of a freight rate and by not quoting the commission structure we are not getting the full picture. Its a curious omission in most market reports.

Psychologically as people and as traders we like to look at whole numbers. When quoting the market we like to say "the biz is worth USD 23.00 pmt" - again no mention of commissions. Or we say this ship wants USD 20,000 for a pac round voyage - again no mention of commissions.

So what does all this mean? It means that on many occasion shipowners forget about the commissions if they are chasing a deal. They care more about saving face, what the market reports will say, what management will say and ultimately this means the whole number price they get for the ship. By whole number I mean Gross result (excl commissions) - rather than the net result.

Here is a real life example in another industry which may better explain.

You sell your house for USD 500,000 in a private sale

Do you tell your father inlaw that you sold the house for USD 500,000 or do you tell him you sold it for USD 485,000 (less agents fees?) - You say 500,000. That's normal.

The newspaper will 500,000, you tell family and friends 500,000, the only person that really cares its 485,000 is the agent, the taxman and your banker.

Summary -  sometimes charging a higher commission can actually put free money in your bank account - not on every deal but if you do 100 deals in a year and 20 percent play on this psychological fact - then that's a whole lot of cash saved.

Do with that...what you will!

If anyone has any comments / disagrees then shoot - its an interesting topic.

Cheers
VS

This weeks Top 10 - visitors to the blog

United Kingdom 446
United States 327
Singapore 217
India 182
Greece 163
Australia 80
Netherlands 68
Russia 62
Malaysia 48
Germany 45

Interesting dialogue from the 'shinc vs shex thread

Thought it may be of interest to others

Anonymous said...


Say, I am buyer and have chartered a vessel. Will the term SHEX-sundays, holidays excepted, be to my advantage in saving the laytime? If these days are excepted, then it should mean that I can load the cargo during these days and avoid the usage of laytime against me. Is this correct?

Thanks
December 1, 2010 4:04 PM

++


The Virtual Shipbroker said...


Yes that is correct - but guess what? You are paying a higher freight rate. So you save on laytime but the freight rate charged by the shipowner will be higher. If you agreed shinc load the shipowner (in his calculation) would have allowed less time to load and hence given you a cheaper freight rate...
Moral to the story with laytime - just do as the port recommends and dont try to maniplulate it because at the end of the day you will pay somewhere else...
cheers / VS
December 1, 2010 4:08 PM

++

Anonymous said...


Ok, so, higher freight rate, because I will be taking a longer time to load a vessel and, thus, higher freight rate to the owner. But, if I agreed on SHINC then, I would be risking the higher usage of the laytime, but less cost on the freight, since the laytime would be shorter. Would you say it is a trade off?

Is there a way to call you/office?


December 1, 2010 4:25 PM

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The Virtual Shipbroker said...


yes thats the trade off. Sorry i can only be contacted by email. If you want more 'valuable' advice you can hire me as a consultant - like other supersmart companies have decided to do. Im cheap and I save you millions...
cheers


VS
December 1, 2010 4:35 PM

End

Point of clarification about SUBJECTS

The word SUBJECTS in shipping speak is a shortened way of saying

Subject to "charterers approval" within 24 hours
Subject to "Stem in order" within 2 days
Subject to "my dog not eating my homework"..

++

You can have 'subjects' in any kind of negotiation. When I bought a house recently the agreement was 'subject to pest inspection' - withing 3 days. Another popular one is 'subject to finance' - 7 days.

So the key here is that 99 percent of the terms and conditions are agreed and now we are just waiting on the 'subjects' before the deal is confirmed. During the waiting period (on subjects) it is not ok to try and re-negotiate the terms and conditions already agreed. That is frowned upon in just about any negotiation...to be sure!

Hope this helps

VS - "Every day above ground is a good day" - Scarface