For those of you not involved in the dry bulk shipping market, you can stop reading now. It’s OK, I don’t mind, I won’t take offence. For those involved, you will probably share how I am feeling at the moment. For the last week or so, a correction and slowing down in the freight market, first paper, then physical, has turned into something – brutal seems to be the current word of choice in the market – that has challenged many people’s assumptions, including my own.
I am trying my hardest to be philosophical about it: just as no one expected the market to rise the way it did, neither did people expect to fall so precipitously. What the shipping gods giveth, so do they taketh away. This is probably not very helpful to those expecting incisive analysis, or even a narrative to latch on to, or a simple story to help explain what is going on. But it’s the way it is. That I should think this should be no surprise to regular readers, but I am not foolish enough, or arrogant enough, to believe that anything I say or write could change anybody’s mind about anything, let alone move the market. I can only add my opinion to everybody else’s and leave it at that.
Let’s go back to this time last year. I wrote then that the time was right to buy, as I expected the market to be good for a number of reasons, the size of the fleet and the lack of newbuildings on order, a post COVID (I was really optimistic then) economy needing to spend and build their way to a better future, and that fundamentally ship prices made sense. So I sat in my laurels a bit when the market began to rise, but the rate and way the market improved was beyond my predications and expectations, and took me as much by surprise as anyone else.
And now? Well no, I certainly did not expect the market to fall so sharply as it has, and I have been as guilty as anyone by saying “it appears to a paper correction” to wave away the gathering momentum of the downturn, to watching every FFA or index, or fixture and parsing the entrails for hope, of any sort. The story today now seems to be that we have hit a floor, and the market has found a level it can work up from again. Humph – tell that to my colleague on the far east desk here at Ursa Shipbrokers, still working a spot vessel out there. It is nine o’clock on a Friday night, when good chartering brokers should be tucked up in a large glass of beer. And don’t ask me what I am still doing here either.
The problem with falling – and rising markets for that matter – is that despite FFAs and indices and reported fixtures showing a fall or rise in freight rates, it does not mean that everyone is equally affected. Those owners that fixed and delivered ships on to period charterers two or three weeks ago are probably feeling quite relieved, but don’t believe those that say that they knew what was going to happen. Were they lucky? Certainly that is a more powerful reason, more so than foresight or wisdom. Managing risk in the face of the unknown I can accept as being wise. If the market falls away in the meantime proves only that the risk was always there, not that you knew it was going to happen.
And people forget that the decisions made in the real freight market, and the sale and purchase market for that matter too, can be upset by the unseen and unknown, the unpredictable, that change the terms of what has been already agreed. Or simply put: shit happens. There does not have to be a reason. And there is no planning that can avoid this, just – hopefully – a properly worded and thought out contract that makes decision making clearer and losses manageable, and disputes – or worse arbitration or court proceedings avoidable. Much as I love and respect my learned friends, I still believe that however important a shipbroker may be in finding and concluding business, it is also their role to protect and guide their clients so that their clients can deal the situation when shit happens.
Of course, there are some cases where things happen that any contract, charterparty, saleform, or newbuilding contract, cannot possibly foresee or cover. This is when arbitrators, and the courts can guide and resolve issues based on what has been agreed by the parties. But shipbrokers have a role in this too, and certainly a commercial resolution is by far the easiest, and least expensive way to resolve a situation, all other things being equal.
The shipbroker is not just for fixing, but for the life and performance of the contract, and indeed beyond. Any problems that arise usually hit them in the neck first, and their income is always directly related to the success – or otherwise – of the deal. Shipbrokers never turn their phones off, are always available, not just for fixing business, but for opinions, for counselling (commercial as well as psychological), for suggestions, for resolutions, for negotiations, for fights, for moral support, for advice, for better or worse, for richer or poorer ….. well you know what I mean.
Shipbrokers are not machines, but they play a hugely important role in the efficient working of the markets, disseminating market knowledge, testing resistance, and are crucial all in the all-important price discovery mechanism. Most negotiations would not take place unless there was a buffer between owners and charterers, or buyers and sellers, to take the sting out some of the discussions on the way through, and to protect principals from saying too much, or too little, at the wrong time.
This is why shipbrokers still exist, and why fixing platforms have a limited role in the market. It’s not just about ships and cargoes, about numbers and terms, about selling and buying. Every contract is different, every principal is different and every day is different and no computer navigate this, at least not yet. Computers have helped the market to become more competitive and efficient, but the decision making process remains a uniquely human process. And all human beings are unique.
But in a brutal market brokers’ lives, and their work, is to be respected and appreciated as much as when times are good. Dry bulk shipping, that poster boy or girl of perfect competition cannot be affected by any one player, however big or small. Owners and charterers, buyers and sellers, are price takers more or less, and cannot miraculously get a better deal than anyone else, they just have to be in the right place at the right time. Brokers are good for that too. They may get lucky, they may be unlucky, but that is life. But shipbrokers, like the poor, are always with us. Treat your broker as they deserve to be treated. They are not to blame for everything that happens in the market. They were with you when the market was low, it is only right that they are with you in the good times, because they will still be around when the bad times come back around again, as surely they will. They don’t know all the answers, because after all, despite what you may think sometimes, they are human beings too.