Last year, Rotterdam based shipbroking firm Blue Ocean Brokers, a subsidiary of MMTA-Member Odin Warehousing & Logistics (OWL), launched a revolutionary idea to charge a flat brokerage fee of EUR 750 per fixture, instead of a percentage of the seafreight. The aim is to close more fixtures, as the ship-owners would have to take less money into account in their voyage calculation, reducing the seafreight level the charterer has to pay. “It is a win-win-win situation”, says MD, Alain Grotenhuis.
According to Grotenhuis the new concept adheres to the strategy and philosophy of the Odin Group, as it adds value to our customers’ supply chain by decreasing logistics costs without compromising on the service level.
“By maintaining low overhead costs, investing in ICT facilities and choosing the right location, we are able to offer our clients a value proposition which means reduced costs on their supply chain, but still offer a dedicated service with the famous single point of contact principle.”
The same applies to our concept in shipbroking. “In our opinion, it is simply unfair that we, as an intermediary, gain more money when the seafreight is higher, although the workload remains the same. Moreover, as an intermediary, the risk of money loss is only in a commission which is not to be paid by the ship-owner. Whereas both the charterer and the ship-owner invested in assets—the ship and cargo – and thus run a higher risk of loss of capital. Therefore, we think the majority of the benefit should lie with those running the real risk of capital loss,” says Grotenhuis.
“With this strategy, it is important to think about how the landscape has changed over the years. Traditionally, in the past, brokers could create a comparative advantage by having a large network of ship owners and charterers and the ability to quickly mix and match the cargo position to a ship position. This was in the days of telexes and, earlier, in cafés like the Baltic Exchange where brokers met ship-owners to ‘sell’ a cargo”, Grotenhuis claims.
In Grotenhuis’ opinion, this traditional way of mixing and matching has vanished. He continues, “with the evolution of the internet, the shipping market has become open to everyone. Charterers can be much more easily approached directly by a ship-owner and vice versa. By creating an automatic address list, with the click of one button, you can inform ship-owners about your open cargo position. In short, both the workload and communication expenses of the broker have decreased. This should be accounted in the earnings of the broker, which is his brokerage.”
In a broader sense Grotenhuis thinks the role of a shipbroker in general is on the line. In his opinion, it is just a matter of time before the broker becomes redundant. “Just look at the financial market or the housing markets. A house owner can now sell his house via the internet without the use of realtor. In financial markets, banks are not allowed to charge a percentage on the value of the mortgage, only a flat fee,” says Grotenhuis.
Although the concept is revolutionary and is proven to reduce seafreight levels, some charterers are skeptical of the concept, as they are afraid there are hidden costs which arise only later. “Sometimes it is a struggle to convince a client,” Grotenhuis says. “But this concept is even more transparent than a commission and is supported by a charter party, clearly stating the money we earn, and countersigned by both parties.”
With the claim by some charterers that they do not benefit from a reduced seafreight, Grotenhuis is brief. “It is simple, the owner makes a calculation on all the costs of the voyage. Besides bunker costs and daily operation costs, the commission paid to the shipbroker is also accounted for. So if a voyage costs EUR 100,000 on seafreight with 3.75% on brokerage, EUR 3,750 is included. We charge a flat fee of EUR 750—EUR 3,000 cheaper, and thus instead of EUR 100,000, the seafreight is now EUR 97,000. If the charterer ships 3,000mtns, this means his supply chain costs are reduced by EUR 1.00 per mtns. Multiply by your year’s tonnage, you know how much you save.”