A Shipbroker is a person or entity who
- arranges transportation of goods by sea
- arranges employment of a vessel or
- sells and buys ships on behalf of her clients
A shipbroker acts as an intermediary between ship owners and charterers or the buyers and sellers of ships.
A shipbroker maybe part of a shipbroking department in the principal’s own organisation, or part of a separate company within which individual brokers tend to specialise as owner’s or charterer’s brokers.
There can be an extended ‘chain’ of brokers (occasionally only one) between the two principals.
Each broker involved in the fixture receives a commission on the gross freight or hire earned by the ship owner.
Various shipping business activities which now operate under the general heading of ship broking, may be divided into three main “disciplines”:
- Dry cargo chartering
- Tanker chartering
- Ship sale and purchase
In this article we will consider in detail a typical business day of a dry cargo Shipbroker (written in 1st person) and the actions that a Shipbroker takes during the negotiations and servicing of a single voyage.
Bear in mind that the process of “fixing” a vessel definitely takes more than 1 day, some running into a few weeks depending on the urgency of the deal. But considering the fact that a Shipbroker works with many clients and many contracts simultaneously, the daily operations could include all items from this list.
The process usually starts with a call from a principal (in our case it is the charterer). The charterer has just secured a sales contract for, say movement of coal in bulk, and is looking to conclude a charter party, so he urgently needs a ship.
First and foremost, I need to gather following information from the charterer before going into the market :
- Charterer’s & Shipper’s background
- Type of cargo, quantity, stowage factor
- Loading & discharging ports
- Loading and discharging rates according to Charterer’s sales contracts
- Commission details
- Laycan (shipment date)
Based on above details, I then check :
- Charterer’s and Shipper’s reputation
- Last few shipments of this charterer, business address and contact details, person in charge
- If the shipper is known I check with them whether the cargo is in port or when it is expected to arrive
- If there are any possibilities to improve loading/discharging rates
- If it will be possible to avoid or reduce address commission as it influences final freight rate
Armed with these details I go into the market looking for a ship, but as a professional Shipbroker I already know :
- Rate idea for this business
- The real chances of finding suitable tonnage quickly and
- Most importantly which ship owner to call so as not to delay the whole cycle
A charterer or ship owner expects any Shipbroker worth his salt to have such level of awareness and provide some initial rate/vessel idea.
Now comes the arduous task of contacting the right ship owner and starting the process of negotiation.
Depending on the current state of the market, I could get the right vessel and rate required in one call but there are times when I have to make dozens of phone calls and emails and still wait for a few days to find a suitable ship/terms.
Well now that I have identified the right ship/rate,
- I send the ship owners initial rate offer to the charterer
- If the rate offer is to the liking of the charterer, then I get the complete terms and conditions of the charter from the shipowner and send to charterer for review
- Charterer may agree to the terms or may wish to make some changes which I then communicate with the ship owner for their confirmation
- Once an agreement has been reached, I advise the ship’s details including ships certificates (where required) to the charterer
- The final fixture recap is prepared and confirmed with both parties
- Get timely confirmation that all subs lifted
- Charter party is signed by both parties
The fixture is now complete.
But before you think I can now relax with a drink with an umbrella in it, let me tell you that all of the above is just half the battle.
Post-Fixture – Loading
Everything is beautiful and hunky-dory on paper, but there is still a lot to be done on my day.
I still need to
- ensure that the charterer/shipowner has nominated an agent at the ports
- ensure that the load port agent has received the nomination from shipowner in order to nominate the ship with the port
- monitor the agents, stevedores, shipper, cargo movement on a daily basis
- monitor that the bills of lading drafts are confirmed in time
- monitor and report loading speed, loading berth, weather conditions etc on a daily basis
- ensure that the shipowner and charterer are informed daily about current stage of loading process
- check NOR+SOF upon completion of loading and find out if demurrage occurred or not
- receive, check & send freight invoice
Post-Fixture – Discharging
Ok so all the required stuff from the port of loading is done, but I still need to
- ensure that the payment of freight and commission is done (get the swift copy etc etc)
- ensure that the discharge port agent receives the nomination together with ETA
- monitor the ships ETA to discharge port and discharging prospects/queue on a daily basis till berthing
- monitor and report discharging process, holidays, weather conditions etc
- check NOR+SOF, if there is demurrage
- do my final calculations of discharge port demurrage and its payment control
Now I can sit back with that drink with an umbrella in it.. Oh wait, I am getting another call from another cargo owner looking for a ship..!!
So as you can see, shipbroking is a demanding and often stressful career, but the rewards can be good for a successful shipbroker.
Shipbroking is a highly competitive field and as per some unconfirmed reports, indications are that there are far more Shipbrokers than shipowners or charterers in the world.
A successful Shipbroker will therefore have to build a strong network of contacts around the world, behave ethically and morally and follow best practices.
In some cases it means that you may spend decades on relationship and network building, yet not be able to cover 80% of your main activity segment.
Fortunately there is a very useful solution which can assist you to do all of the above using an integrated system.
OpenSea.Pro is the first ship chartering marketplace system using which you can
- Monitor the state of the world freight market in real time
- Instantly find vessels or cargo that match your requirement
- Get offers, discuss terms & fix charter party online
- Start your firm negotiations and
- Send a final recap or other ship’s docs or whatever you need in a single chat
Do you wish to share what a typical day in the life of “you” looks like..??
Drop me a line with a small bio of you and your work function and if suitable to this blog and useful for all, I will publish it..
If cargo actually loaded on board 12000MT, what is the total amount of charges and how much commission could the broker get from this chartering business? What does the charges consist of？
Thanks for this very detailed post, its a boost for me. Am a Marine Engineer but wants to go into ship brokering especially for petroleum products, i have a registered company but i don’t know how and where to start or get contacts of charters. I want to learn more and grow in this business. What do you recommend for a newbie like me in this business.
try to get a job with a reputed charter house and learn the business first..
Very nice article thank you .
Is it possible, that one deal could be managed through more than one broker ?
for example, to have 3 brokers linked in between the cargo owner and the ship owner , would that be applicable ?
and if yes, how would the commission matter be handled in this case ?
thank you .
Hi Ahmed, yes there are cases like that.. The commission could be shared based on mutual agreement and mention in the C/P..
could you please tell how much a pretty good ship broker earns a month on average?
i am a 3rd mate in merchant navy.
Hello Vimal, there is no minimum or maximum.. It depends on what type of cargo and vsls you fix and the commission you will get for it.. The commission also varies between 1-5% depending on owner/broker and cargo..
I have a record as a ship engineer. I have start to be intrested in cargo broking. I have no company yet.
Sometimes i find cargo offer in databases and copy that information and send it to shipping owner with suitible vessels. Sometimes i get answers sometimes not. At the moment i only helping the shipping owner and trying to learn, as i see it.
To collect the commision fee (e.g 1,25%) i need first to start a company.
Then if i see this cargo offer in the future must first contact the broker who post the offer to inform him about my reason or must i be in contact with the cargo-owner ?
Hello Mikael, the best option for you would be to start working with a known broker and reach some agreement with the broker on your commission and learn more from there..
Hi Haresh, Understand that there isn’t any short cuts 🙂
Not at all..
How does a Vsl owner believe a new ship broker? is it possible to become a ship broker as a fresher? what are the things to do to become a ship broker?
Hi Thanga, you need to build a relationship with the owners.. If you are a fresher, the best option would be for you to work with a ship broker to understand the business first..
how exactly does a shipbroker locate the correct ship?
Thank you Hariesh and others especially Tony Fordyce for this insightful blog and valuable comments. As a chartering manager ( for both bulk carriers and dry bulk commodity) I have been in all these processes. My kind query to especially Tony – how a broker can practically and successfully check the background of a charterer these days (when trust is the rarest commodity) especially when the charterer is located in a place like emerging and developing countries. The main concern for a broker or a ship owner whether the charterer will pay the freight in time and honour the demurrage incurred.
I think a ship broker is mediator between customer and shipping company.
Some customers do not have knowledge, how to book the direct shipment for shipping the cargo, so they can the help ship broker. and broker arranges the booking.
Am i right ?
Hello Tim, if you are looking for simple layman’s terms you can refer a shipbroker as a “facilitator” rather than a “mediator” as a shipbroker facilitates the business between the ship owner and cargo owner..
You are right when you say that some customers don’t have the knowledge of how the shipping process works and a shipbroker is a definite value added asset to have and guide you through the process..
Of course this is a very condensed version of what a shipbroker does, and I suspect that it could be quite localised. I would like to make the following points (from very lengthy experience of broking in London, Tokyo, Shanghai and Athens):
1. The negotiation process:
a) There can be quite a long stage of negotiation of the main terms, especlaily the rate, so you don’t just move straight from stage1. to stage 2. These days most contentious matters are handled during the main terms negotiation, so charter party details are often little more than a formality.
b) Charter parties are almost without exception sent by charterers, not owners.
c) Basic ship’s details would be sent at the very initial stage and as part of the offer (although I agree that a sometimes very detailed and lengthy questionnaire containing further information may have to be completed later). Especially for time charter, it’s esential for a charterer to know the ship’s characteristics (critically, speed and consumption) from the outset.
d) It is often (probably more often) the case that the charterer will make the first offer, not the owner.
As a broker, I have never been involved in any of the checking or monitoring processes you mention, except insofar as I (or my post-fixture department) would pass on information received from the charterers or owners to the other party. In fact, as broker, I would have no status to contact agents, stevedores, shippers etc, who would generally only give information to their contractual party, namely the owners or charterers.
Particularly when a ship is on time-charter (and especially on period time-charter), there is little that the broker has to do except send in his commission debit notes, other than to try to help settle any disputes between the parties (e.g. regarding off-hire), and pass on requests for Letters of Indemnity against, for example, discharge of cargo without original Bills of Lading.
To be honest, as soon as you have concluded one fixture, it is indeed time to move on to the next. The most successful brokers in the market are concluding as many as 150 fixtures a year, and certainly have no time to spend on monitoring processes which are properly the province of the owners or charterers.
Hello Tony, yes it is a concise version as it is impossible to cram the entire workings of a shipbroker or the variations that happens in shipbrokers day across the world in one blog post.. 🙂 Hence it is useful to receive comments such as yours, sharing your experiences and points, for which I am thankful..
the above is accurate but not totally complete – 3 things have to happen before you can take your commission to the Bank
1 fix the vessel
2 the vessel performs (e.g. doesn’t miss her cancelling date or sinks en route)
3. you receive your commission (not quite the formality that it should be , some owners make you wait
until the balance of freight is paid , some owners go bankrupt so be careful with whom you fix )
Thanks Hans.. The 3rd is a very vital point..
perfect. i am a former shipbroker in London and studied with ICS many years ago. i am interested to open up a shiproking office in my home country Morocco and would seek your assistance pls.
Dear Mr Hariesh
really many thanks to you because of your useful article . just i want to know something
why the charter or cargo owner contact the shipbroker to find ship owner ? can the charter go to direct to ship owner to hire ship to` reduce the commission ?
when i read your article , i understood that the shipbroker is middle man between the charter and ship owner so
when he connect them to have contract and have a commission i think his job is ended so why he should do the roles of Post-Fixture – Loading and Post-Fixture – Discharging ?
also can the shipbroker collect his commission from shipowner and cargo owner or only one that is shipowner ?
can the nvocc or freight forwarder enter this business ?
charterers and shipowners prefer to go through brokers to avoid clashing. As we say shipbroking is the lubrecating oil of the shipping mechanism.
Hello Hassan, a broker is more than just a middle man.. A broker has several cargo owners and ship owners/ship managers in his books and is able to produce the required results much quicker than a direct shipper/ship owner can.. Also not all ship owners know the shipper and vice versa and having a broker that knows these people in the market provides a sense of security for the ship owner and shipper..
Shipbroker collects his commission from the shipowner..
NVOCC/Freight Forwarders are only present in the container business and not in the bulk business..
Thank you for insightful article. It is really useful.
Interesting and useful, thank you!
Hope you will publish a day in the life of a port agent. 🙂
Could you please clarify: what is “all subs lifted”?
Although I am just amateur ship broker for my company right now, I will try to explain it to you. Pls feel free to correct me if above is wrong.
When charterer and ship owner recap the fixture, there will be sub time period for allowing each parties find other alternatives. when sub time ended, it was called “lift sub” meaning that both charterer and ship owner finally fixed with each other.
A vessel is deamed to be fully fixed when all subjects are lifted by the charterers such as subject BOD (approval of the chrtrs board of directors) subject STEM (availability of cargo), subject details (when all C/P clauses are agreed and accepted, etc
Hi Daniel, when the terms are negotiated and before final fixture, there could be several “subject to” terms – such as subject to approval, subject to port confirmation etc.. This means that there is still a chance that the fixture cannot be completed as long as these “subs” are mentioned and therefore a time frame maybe set for these subs to be lifted failing which the other party can walk away from the fixture and look for alternate elsewhere..
Thank you all!
Hi Hariesh – As usual , an excellent article! You make it sound so easy!
In truth , at the moment (and it has been this way for a while) Shipments are fairly scarce and so is knowledge in the industry about what is required from the cargo owners / C&F agents in order to “tie up “a fixture.
Rate ideas are not usually known (or withheld) and the broker is left guessing whether he / she is on the right track. 1st rate indications are often accepted as being cast in stone and the enquiry is passed around the market until a lower indication is found , instead of sticking to 1 or 2 brokers and negotiating the needed level.
This results in a lot of irritation from owners who are receiving the same enquiry from all over the world and either “drops “it altogether in frustration or puts up the levels under the impression that the shippers are desperate.
Many deals are killed in this way and cargo owners/C&F agents should stick to one or 2 brokers with whom they can build up a working relationship and who will then guide , assist and look after their interests to the best of their ability.
Using a “shotgun “method of blasting an email with the enquiry into the market to 20 or more lines and brokers all at once will often result in the majority of them simply ignoring the enquiry and the business going elsewhere to another agent.
Always keep all correspondence/negotiations professional and you will be on the right track.
🙂 Thank you for your added wisdom Bentley.. Always welcome..
What is NOR+SOF?
Hi Digvijay NOR = Notice Of Readiness & SOF = Statement Of Facts.. These are key documents in a charter in order to calculate any demurrage/despatch due..