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Shipbroking is a financial service, which forms part of the global shipping industry. Shipbrokers are specialist intermediaries/negotiators (i.e. brokers) between shipowners and charterers who use ships to transport cargo, or between buyers and sellers of vessels.
In the 19th century, it was the work of ship-brokers to procure goods on freight or a charter for ships outward bound. They also went through the formalities of entering and clearing vessels at the customs-house. They collected the freight on vessels brought into port and took an active hand in the management of all business matters between ship-owners and merchants, whether shippers or consignees, for which they were paid a fee. In major British ports, ship-brokers were also usually insurance-brokers. [1]
Some brokerage firms have developed into large companies, incorporating departments specialising in shipping's various sectors, e.g. Dry Cargo Chartering, Tanker Chartering, Container Chartering, Sale & Purchase, Demolition, Futures and Research; other "boutique" shipbroking firms concentrate on specific sectors of the shipping market.
The principal shipping and shipbroking centres worldwide are London, New York City, Singapore, and Tokyo, as well as where many shipowners are based such as Oslo and Athens. Other places continue to develop in international shipping services, such as Hong Kong and Shanghai, Delhi and Mumbai, Copenhagen, Geneva, Genoa, Hamburg and Paris in Europe; and in North America, Connecticut, Houston, and Montreal are important shipbroking centres.
Until the late 20th century, it was commonplace for shipbrokers to cover more than one discipline, although nowadays the vast majority of shipbrokers specialize in a specific sector. Like many financial services, historically shipbroking grew out of the City coffee houses, becoming established at the Baltic Exchange; [2] among its most famous members being Ernest Simpson, ex-husband of The Duchess of Windsor (died 1972), and Alderman the Lord Mountevans.
The Institute of Chartered Shipbrokers sets educational standards throughout the industry worldwide, whose Fellows are accorded the privilege of using the post-nominal letters FICS.
Sale & Purchase ("S&P") brokers handle the buying and selling of existing vessels in the secondhand market or contract new ships (called newbuildings in industry parlance) from shipbuilding yards. S&P brokers promote opportunities and discuss market trends with shipowners, charterers, investors and bankers, as well as reporting on market sales, vessel values, market trends and activity. When a shipowner has a vessel to sell or is looking for a vessel to acquire, the shipbroker will scour the market for buyers, or for suitable sales candidates, discuss with potential counterparties or their broker the main points of the sale transaction and eventually negotiate all of the details, usually based on a standard contract. During such proceedings, shipbrokers not only negotiate the price of the vessel on behalf of their principals but also all the logistical details for the transfer of the title and the vessel itself to the buyers (new owners), including the banking arrangements. During any negotiation, minor disputes may occur, which are to be handled in accordance with market fluctuation, i.e. the market may be moving in favor of the buyer (vessel price is softening) or in favor of the seller (vessel price is strengthening) giving each party a potential reason to cancel the transaction. When shipbrokers act on behalf of passive investors or financial buyers, they may also have to find time charter employment for the vessel and assist with practical arrangements such as the appointment of ship managers. Some S&P brokers specialize in the sale of ships for scrap, requiring a different set of skills and contacts.
Dry Cargo brokers are typically specialists in the chartering of Bulk carriers, and are engaged to act either for a shipowner looking for employment for a ship, or a charterer with a cargo to be shipped. Dry Cargo brokers maintain large databases of vessel positions, cargoes, and rates, paying constant attention to the direction of the markets so as to advise their clients accurately as to how to maximize profits or minimize expenses. Dry Cargo shipping can, in general terms, be categorized by Vessel size: namely, Bulkers such as Capesizes, Panamaxes, and Handysize. Each size of vessel suits different types of cargo and trade routes/ports. Many owners, charterers, and brokers tend to specialize in one or other of these sectors.
Tanker brokers specialize in the chartering of tankers, which requires a different set of skills, knowledge and contacts from dry cargo broking. Tanker brokers may specialize in crude oil, gas, oil products or chemical tankers. Tanker brokers similarly negotiate maritime contracts, known as charter parties. The main terms of negotiation are freight/hire and demurrage.
Oil being a fast moving trade, freight rates for crude oil tanker charters are most commonly based on the Worldscale Index; the Worldscale Association publishes flat rates annually. [3]
For some specific voyages, such as named voyages (i.e. from A to B) and for specialist ships, like LNG tankers (a highly specialized sector of the tanker market), freight rates can be agreed on a lumpsum (or dollar per ton) fixed rate between both parties.
Container brokers specialize in the chartering of container ships and provide container shipowners and charterers with market-related information and opportunities.
Shipping Futures brokers specialise in negotiating maritime futures contracts.
A container ship is a cargo ship that carries all of its load in truck-size intermodal containers, in a technique called containerization. Container ships are a common means of commercial intermodal freight transport and now carry most seagoing non-bulk cargo.
Mitsui O.S.K. Lines is a Japanese transport company headquartered in Toranomon, Minato, Tokyo, Japan. It is one of the largest shipping companies in the world.
A cargo ship or freighter is a merchant ship that carries cargo, goods, and materials from one port to another. Thousands of cargo carriers ply the world's seas and oceans each year, handling the bulk of international trade. Cargo ships are usually specially designed for the task, often being equipped with cranes and other mechanisms to load and unload, and come in all sizes. Today, they are almost always built of welded steel, and with some exceptions generally have a life expectancy of 25 to 30 years before being scrapped.
A boat or ship engaged in the tramp trade is one which does not have a fixed schedule, itinerary nor published ports of call, and trades on the spot market as opposed to freight liners. A steamship engaged in the tramp trade is sometimes called a tramp steamer; similar terms, such as tramp freighter and tramper, are also used. Chartering is done chiefly on London, New York, and Singapore shipbroking exchanges. The Baltic Exchange serves as a type of stock market index for the trade.
The Norwegian Shipping and Trade Mission (Nortraship) was established in London in April 1940 to administer the Norwegian merchant fleet outside German-controlled areas. Nortraship operated some 1,000 vessels and was the largest shipping company in the world. It made a major contribution to the Allied war effort.
The Baltic Exchange is a membership organisation for the maritime industry, and freight market information provider for the trading and settlement of physical and derivative contracts.
"Demurrage" in vessel chartering is the period when the charterer remained in possession of the vessel after the period normally allowed to load and unload cargo (laytime). By extension, demurrage refers to the charges that the charterer pays to the ship owner for its delayed operations of loading/unloading. Officially, demurrage is a form of liquidated damages for breaching the laytime as it is stated in the governing contract. The demurrage sometimes causes a loss to the seller as it increases cost of the total freight.
Erling Dekke Næss was a Norwegian shipowner and businessman. Næss was Deputy Head of Nortraship's New York office from 1942 to 1946. Næss was the initiator behind the OBO carrier. He is also credited as the proposer of the Norwegian International Ship Register, which allowed Norwegian shipowners to compete on an equal footing with flags of convenience.
Bulk cargo is commodity cargo that is transported unpackaged in large quantities.
Chartering is an activity within the shipping industry whereby a shipowner hires out the use of their vessel to a charterer. The contract between the parties is called a charterparty. The three main types of charter are: demise charter, voyage charter, and time charter.
A freight rate is a price at which a certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport, the weight of the cargo, and the distance to the delivery destination. Many shipping services, especially air carriers, use dimensional weight for calculating the price, which takes into account both weight and volume of the cargo.
A shipowner, ship owner or ship-owner is the owner of a ship. They can be merchant vessels involved in the shipping industry or non commercially owned. In the commercial sense of the term, a shipowner is someone who equips and exploits a ship, usually for delivering cargo at a certain freight rate, either as a per freight rate or based on hire. Shipowners typically hire a licensed crew and captain rather than take charge of the vessel in person. Usually the shipowner is organized through a company, but also people and investment funds can be shipowners. If owned by a ship company, the shipowner usually performs technical management of the vessel through the company, though this can also be outsourced or relayed onto the shipper through bareboat charter.
Worldscale is a unified system of establishing payment of freight rate for a given oil tanker's cargo. Worldscale was established in November 1952 by London Tanker Brokers' Panel on the request of British Petroleum and Shell as an average total cost of shipping oil from one port to another by ship. A large table was created as result.
The Compagnie Maritime Belge (CMB) is one of the oldest Antwerp ship-owners. It is controlled by the Saverys family who also own major stakes in the Exmar and Euronav groups.
An oil tanker, also known as a petroleum tanker, is a ship designed for the bulk transport of oil or its products. There are two basic types of oil tankers: crude tankers and product tankers. Crude tankers move large quantities of unrefined crude oil from its point of extraction to refineries. Product tankers, generally much smaller, are designed to move refined products from refineries to points near consuming markets.
Affreightment is a legal term relating to shipping.
The international shipping industry can be divided into four closely related shipping markets, each trading in a different commodity: the freight market, the sale and purchase market, the newbuilding market and the demolition market. These four markets are linked by cash flow and push the market traders in the direction they want.
A forward freight agreement (FFA) is a financial forward contract that allows ship owners, charterers and speculators to hedge against the volatility of freight rates. It gives the contract owner the right to buy and sell the price of freight for future dates. FFAs are built on an index composed of a shipping route for tanker or a basket of routes for dry bulk, contracts are traded ‘over the counter’ on a principal-to-principal basis and can be cleared through a clearing house.
Clarkson PLC, often referred to simply as Clarksons, is a provider of shipping services, and is headquartered in London. In 2011, Lloyd's List described the company's shipbroking service as the "undisputed heavyweight of the shipbroking market". It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
Top Ships Inc. is a supply chain maritime transportation operations management company responsible for seaborne trade of raw materials. The company was founded by Evangelos J. Pistiolis on January 10, 2000 and is headquartered in Maroussi, Greece.