Market Secrecy Bad For Rates, Say Brokers

Increased secrecy in the tanker chartering market may be pushing rates lower, even though many brokers and owners like the idea of doing private business. Although it has always been a secretive business where only a portion of trading was made public, shipping sources say more and more tanker chartering is being done directly through a single broker rather than being put out to tender. However, ship owners and some brokers say charterers are able to dictate rates because they have more information about cargo and ship availability and can influence the perception of supply and demand. Despite this, most tanker brokers generally prefer private business even if it means they cannot compete for some cargoes. More cargoes are now offered just to one broker, with major oil companies sharing them out on a rotation basis rather than circulating to a panel, brokers said. "A lot of cargoes are being done off market," one broker at a major London house who asked not to be named said. "It can be frustrating but I think its is better in a poor market - it stops too many offers being made," he said. However, another broker said private deals have always been to the detriment of owners and brokers. "You always get more private cargoes when you have a (poor) market like this. Owners may think it is to their benefit, but they are working in the blind," said Sultan Riaz Khan, president of broker Marinav Shipping and Trading Co. Even in good times underbidding pushes down rates and depresses commissions because owners are desperate to quote for business without knowing who they are competing against, he said. The demise this year of an electronic tanker trading system in which vessels and cargoes could be tendered on screen in an open market community has also played a part, according to some brokers. Smaller brokers who were able to compete more easily in the open screen-based market are now under greater pressure. Technology Plays A Part Brokers have adopted new technology to manage information and are increasingly using cheaper e-mail messaging, rather than telex, for communicating vessel availability and cargo details. However, one broker said conditions had returned to the way they were 20 years ago when the big houses held an advantage simply by being able to staff more phones. Most brokers said a lot of business is still done with old-fashioned personal contact over the telephone. However, there are some developments that could lead to increased openness. Tanker owners organization Intertanko is investigating the launch of a protected Web site, within which ship owners would be able to counter charterers' advantages by swapping information regarding ship and cargo availability. That could counter the impression given by many brokers that owners' lack of confidence has choked off potential rate revivals on some routes. An example this week was that bidding for a VLCC from West Africa to Taiwan this started at W45 (about $6.75 per ton) but ended being fixed at W39 ($5.85), brokers said. "We only stand a chance if owners step back and look. In no other industry would $2 million (freight) deals be done in just five minutes," one broker said. - (Paul Berrill, Reuters)