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10 February 2009
Not your run-of-the-mill shipbroker - Lloyd's List Newspaper 10/02/2009

You expect a shipbroker to talk ships and shipowners but Tim Jones, chief executive of France’s Barry Rogliano Salles, began by talking industry and, in particular, Chinese steel mills.

The reason is not hard to find. Chinese steel mills have been one of the principal motors of the world economy over the last five years and their relative inactivity in recent months has been a key factor in the economic slowdown.

But Mr Jones’ interest is more direct still. BRS counts seven out of the 10 major Chinese steel mills among its customers since it approached them seven years ago to propose helping to reorganise their maritime supply chains on a long-term contractual rather than a piecemeal basis.

The result is that today BRS, which claims to be the leading broker in the Chinese steel industry, is able to take a positive view of prospects for the dry bulk market in 2009 as it sees the first signs that China’s steel mills are ready to start building up production again.

Mr Jones is nothing if not cautious, however. There would not be an explosion in demand for steel in the near future, more the start of a slow return to normal production and, with it, a requirement for transportation. “We are starting to feel that they are starting to get more positive signs,” he said of the steel mills. “The Chinese government has put in a large infrastructure project, which will allow them to get back to at
least normal production.”

There was already an upward curve in the dry bulk shipping market, he said. January had been an improvement on December. The objective for the time being, however, was less achieving growth than getting the market back to normal functioning. “I am waiting for a return to normal transportation, where people are actually moving cargos to
organise their industrial processes,” he said. “For the time being, they are still playing with stocks and readjusting their production levels. This has not worked itself out yet. There are still a few months to go.” The level of freight rates is barely a subject of conversation by comparison with the need to restore the basic market mechanisms. “There is an upward curve in activity, not in freight rates,” Mr Jones said. “That’s what is important, that there should be a constant flow of cargos and contracts being respected. That’s what has been missing for the last three months.”

As for rates, he did not expect to see them getting much above operating costs this year. But this would nevertheless be progress, given that they had plunged to below this level in recent weeks. This had happened because of the speed with which the market had been subjected to huge swings in demand. Owners had been left with no time to prepare strategies for dealing with them and had been obliged to take whatever they could get. “When the market has just collapsed, you have to take whatever is there,” he said. “That’s why this market went down to below operational costs.”

Mr Jones said he was not certain that rates, notably in the key capesize sector, would improve a great deal this year. “Even if they level out at something above operational costs this year, I expect them to bump along at $8,500 or $10,000 [per day], perhaps up to $15,000.”

The figures appear miserable compared with the still recent $250,000 per day capesize peak achieved in June last year but should be viewed positively, Mr Jones said. “At least there is visibility and people can startmaking plans,” he said. As for the market collapse, he said that BRS had not seen it coming before its peers, but said that it had nevertheless been able to give its major customers advance warning that the market was threatened by serious overcapacity.

“We feel very comfortable with the fact that we were telling all our major industrial clients in dry cargo that there was a large oversupply coming and that they should be thinking of taking cover for only a small percentage of their requirements and not overbook.” That said, he admitted that the company had foreseen neither the financial sector meltdown that had accompanied and compounded the collapse, nor the sheer scale of the collapse itself.

BRS itself nevertheless came through the year well. The company, which is owned in differing degrees by its 42 partners and is one of the handful of international brokers to be active in all shipping sectors, does not publish financial results but had a “very strong year” in 2008 despite weakening markets in the second half. “We did at least as well as in 2007,” he said, adding that this would enable it to continue the international expansion it has been engaged in for the last five years.

BRS has offices in 10 countries and employs 35% of its 180 directly employed staff outside France. This international expansion has been taken in response to the switch in international trading patterns towards Asia. “We are following the cargo base,” Mr Jones said. He said there was no shortage of opportunities for expansion. Southeast Asia and India were top of the company’s shopping list but South America and
the Middle East also figure on it. “Almost anywhere is good if you have got the right people and an understanding of the local culture,” he said. “You just have to invest in it.” Finding the right people is more difficult than finding funding for investment, even in these troubled times.

“Our big problem is people,” he said. “Getting the right people and taking the time to get them up to standard.” The “right people” in BRS’s case means young people with master’s degrees, the ability to speak three languages, an internationalist outlook and “some sort of passion for shipping”. It may be that the difficulty experienced by the
company in attracting such young people will ease given that the financial sector, which was one of its principal competitors for them, has lost a great deal of its lustre in recent months.

Nevertheless, it takes five years of in-house training to get candidates up to the required levels of technical and market know-how. Attract them it must, however, because BRS intends to expand and that means more young brokers. BRS gives the impression that it expects to defy the laws of financial gravity as it moves into what promises to be an extremely testing year for the shipping industry, apparently in expansionist mood. This may be attributable to the fact that its business is founded on “real industry”, as Mr Jones put
it, meaning industry which is catering to the basic needs of humanity and which will continue to exist so long as humanity is inhabiting the planet.

“We feel very comfortable provided that the business we have in our books is performed,” Mr Jones said. He acknowledged, however, that there was a real risk of cancellations and delays and said that the company was monitoring “extremely carefully” its revenue figures and advance business. He said he was “cautiously positive” about the outlook for the current year, rather than optimistic or confident. “We are more confident about our client base,” he said. “We have extremely good and strong relationships with our clients. As long as they are there, we will be doing some of their business. That makes us more comfortable than anything."

Andrew Spurrier
Lloyd's List Newspaper
10 Feb 2009

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