9. Broking

The shipbroker is a specialist in one particular trade or field. In fact brokerage means to go-between. Broker’s expert knowledge is invaluable to both charterers and owners.

Normally the broker represents either the owners or the chaterers. But on some occasions the broker may be the sole intermediary between the owners and the charterers. This may give rise to a conflicting situation as it is impossible for one person to be one hundred percent loyal to each principal.

An important part of the shipbroker’s main aim is to bring the two parties together in order to conclude a fixture. He will not receive any payment unless the fixture is successfully concluded. When it is, he will receive a commission which is a certain percentage of the freight.

Owner’s brokers are appointed by shipowners. Their task is to find cargoes – for their principal’s fleet. They try to get the highest possible freight rates, the quickest loading and discharging, and terms favouring the shipowner in the charter party.

On the other side charterer’s brokers (or chartering agents) help the company with the cargo (the charterer) to find suitable ship. Then the broker’s task is to get the cheapest freight and terms favouring the charterer. So it means a struggle between the owner’s brokers and chartering agents.

There are different types of brokers and I am going to tell you about main types and their duties.

Tanker brokers.

They are brokers who deal with the liquid cargo (such as oils including vegetable oils, chemicals etc.) He may be either owner’s or chaterer’s brokers. But there are some cases when broker is acting as a sole intermediary between the parties. The oil companies normally deal with a limited number of highly specialized brokers.

Dry cargo brokers.

These are brokers who deal with the transportation of dry commodities, ranging from bulk cargoes to packed cargoes. Due to the great variety of products many brokers specialize in one or more commodities or types of vessels. He also may be either owner’s or chaterer’s brokers.

Sale and purchase brokers.

The sale and purchase brokers must have a thorough knowledge about ships, their construction, machinery, shipyards, market prices and so on. They act as intermediaries between shipbuilder and shipowner or between buyer and seller.

The shipbroker must always keep up-to-date with the market both for cargoes and ships.

Broking Introduction

The shipbroker is a specialist in one particular trade or field. His expert knowledge is invaluable to both charterers and owners.

Normally the broker represents either the owners or the charterers. On some occasions the broker may be the sole intermediary between the owners and the charterers. This may give rise to a conflicting situation as it is impossible for one person to be one hundred percent loyal to each principal.

An important part of the shipbroker's main aim is to bring the two parties together in order to conclude a fixture. He will not receive any payment for his efforts unless the fixture is successfully concluded. When it is, he will receive a commission which is a certain percentage of the freight.

Owners' brokers are appointed by shipowners. Their task is to find employment - cargoes - for their principal's fleet. They try to get the highest possible freight rates, the quickest loading and discharging, and terms favouring the shipowner in the charter party.

On the other side charterers' brokers (or chartering agents) help the company with the cargo (the charterer) to find a suitable ship. Then the broker's task is to get the cheapest freight and terms favouring the charterer. It means a struggle between the owner's brokers and the chartering agents, each trying to get the best terms most favourable to his side.

Types of brokers and their duties

a. Tanker brokers

Shipbrokers who deal with the transport of liquid cargo as in the case of those operating in the dry cargo trade, may be either owners' or charterers' brokers. Although there are those cases where there is only one broker acting as sole intermediary between the parties. The oil companies normally deal with a limited number of highly specialized brokers. The shipowners are aware of this and they allow these special brokers to offer their ships to the oil companies and traders. The tanker brokers also deal with the transport of other liquid cargoes such as vegetable oils, industrial solvents, chemicals, fertilizers, etc.

b. Dry cargo brokers

These are brokers who deal with the transportation of dry commodities, ranging from bulk cargoes like coal, iron ore, grain, bauxite and alumina to packed cargoes. Due to the great variety of products many brokers specialize in one or more commodities or types of vessel. It would not be possible for a single broker to keep himself fully up-to-date in all trades and areas at all times. Here again, as for tanker brokers the big charterers prefer to work through a limited number of brokers, although the charterers are not by any means as big or as few in number as the major oil companies.

c. Sale and purchase and contracting brokers

The sale and purchase brokers must have a thorough knowledge about ships, their construction, and machinery. They act as intermediaries between shipbuilder and ship-owner or between buyer and seller. Their interests do not lie with ships and cargoes. If the broker is agent for the seller, he will try to get top prices for the ship but if he is employed to buy a ship for his principal, he will work at keeping the price as low as possible. This type of broker also arranges for the contracting of ships and must keep in touch with the big shipyards throughout the world. He must know the yards' capacities and which types of ships they specialize in. He must also know the second-hand values of ships and in times of slump he may fall back on the scrap market where the shipbroker is employed to sell old vessels for breakfng up.

The shipbroker must always keep up-to-date with the market both for cargoes and ships. He must follow the fluctuations in world trade. It is important that he always has the latest information on the position of ships throughout the world. He should also be aware of what is happening in different countries. The shipbroker must have a good knowledge of the loading and discharging ports, their cargo handling facilities, etc. The shipbroker should keep his principals well informed and always maintain close contact with them.

The broker should:

1) always act within the authority vested in him, and should not exceed it unless specially authorized to do so;

2) exercise due diligence and skill in the execution of charter negotiations on behalf of his principal;

3) keep his principal fully informed about all aspects of the market or the third party which may affect the decision of the principal in connection with the business under negotiation;

4) not withhold any information from, or give wrong information to his principal;

5) not reveal any information or act to the advantage of the third party in the negotiations in order to conclude the agreement;

6) take an active part in the negotiations giving advice and making recommendations regarding offers, counters, proposals and compromises by using his knowledge and expertise;

7) investigate the track record of the owner/charterer before recommending him to his principal.

A charterer or shipowner who chooses to negotiate a charter directly, without the intermediary services of a broker will be directly responsible for failing to secure the best bargiain for himself if he lacks the necessary expertise or bargaining skills required to do so.