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11 March 2016
Clients value BRS' efforts to find solutions in dire market

Said chief executive Tim Jones: “These are tough times for both owners and charterers and we do our best to find solutions that allow the companies to work together.”

Keeping principals working alongside one another “is one of the areas where brokers are really needed and can add value”. He said: “A lot of our clients appreciate this and continue to work with us for this reason.”

But while 2015 may have been the “best ever” for BRS, Jones says he does not want clients to think the company is boasting and repeats that difficult times lie ahead for many in the broking game.

Last year, business written (front book, fixed but not invoiced) was down 11%, although Jones still reckons that was an “incredible” result considering markets were down by 40% to 50%. Volumes were actually up, figures were lifted by the strong dollar, while assets (newbuildings plus sale-and-purchase [S&P]) had a good year helped by deals moving ahead in a lower-price environment.

“The only people who are going to be able to survive are those like us who have huge front books,” said Jones. “We have over 250 million tons of cargo already fixed for the next few years and over 400 years of time charters. These are big, big volumes.

“Unfortunately, some of it is going to get cancelled and there will be bankruptcies, so the front book that used to look so good may no longer look so good as it did. Also, the front book was based on bunkers at $600 and now bunkers are $150. So your bunker adjustment factor is taking all the freight rates down. Others face the same as we do.”

Added Jones: “I am convinced we will only have three or four major broking networks in the end.” That is in addition to the regional players, heavily focused in one location but with outposts. They are going to have a harder time.”

A star panamax dry cargo broker when markets were on a roll may have handled up to 60 fixtures a month. Even on a less ambitious 40 fixtures per month, his average commission of possibly $10,000 per throw meant he was turning over $400,000 per month or $4m to $5m per year, including vacations.

Today, says Jones, the same broker may instead be down to just 30 fixtures per month at $1,000 commission because of the slump in rates, earning just $30,000 per month, roughly 10% or less than previously, and “surely not even covering his costs”.

Consequently, efficiency has become the key to profitability and, says Jones, benchmarking against its rivals is now part of the culture.

Surprisingly, the chief executive seems to be a fan of rival Clarksons, around four times the size of BRS in terms of brokers and operations, for “helping our industry, helping shipbrokers to be more respected and show that we are an important part of the industry and not just fly-by-nights.”

He added: “I think Clarksons is well placed. They have a big front book. They have a machine that sort of rolls. They’ve done a great job.”

So, given the dire dry bulk markets, have tankers markets come to the rescue of broking houses?

“I wouldn’t say saved but definitely contributing to the health of those which have tanker departments,” replied Jones. “China has been very active and we have been involved in that development. One of [our] biggest offices is in Dubai so our tanker boys have done very well.”

Other brokerages will have performed but not necessarily if they are regional or involved in less-buoyant tanker sectors, he continues. Also, the “big boys” of broking have been on the offensive and not every tanker broker will have been “smiling to the bank”.

Source: Tradewinds

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