Telex as past of ship chartering as future of ship chartering

Past and future of ship chartering

Shipping markets have changed through the years and the same has happened with the ship chartering as well. From negotiating and fixing through a telephone and a telex to instant messaging and e-mail. What is next? In this article, we will also analyze the results of a latest survey about the past, present and future of ship chartering as well as the aspects of a panel discussion in FONASBA with the same hot issue: The future of ship chartering.

In order to review the future of ship chartering, let’s see a few things about how it was in the past. The older chartering professionals will remember what a challenging and romantic task it was to fix a ship and a cargo a few decades ago. At that time, the broker needed just two telephones and one typewriter. He was negotiating with the shipowner and the charterer on the phone, many times talking to both of them simultaneously - having the shipowner at one ear and the charterer at the other and trying to convince them fix their ship or cargo. As soon as the deal was concluded and the shipbroker hanged up the phone, he should type a Booking Note on the typewriter. This Booking Note should be signed by both parties as soon as possible, in order to make sure that the shipowner and the charterer would not forget what they agreed. In some cases, they were appeared to have forgotten some of the agreed terms and conditions and especially the ones they did not like to accept but they were convinced by the shipbroker or forced by the other party. After the Booking Note was written, the office boy would take it and deliver to both parties for signature. If the parties were based in different places, then the office boy had to send a telegram. A few years later, on about late 1950 or early 1960, the office boy was replaced by the telex. For saving typing time, the telex had a special tape with holes, however preparing the tape was more time consuming than sending a message on the spot. Furthermore, due to the very expensive tariffs of telex at that time, chartering people started to communicate in a unique way, via abbreviations. Those abbreviations have been established in the ship chartering language and they are used even today. A few years later, around early-mid 1980 decade the telex was replaced by a facsimile machine while not earlier than the late 90’s the personal computers, the internet and the E-mail came to our life.

But how has ship chartering changed so far?

Nowadays, ship chartering has changed a lot and has become much more modern and easier. Hundreds of positions or inquiries are received in the shipbroker’s inbox each day. The shipbroker collects all positions and cargoes, matches them and then forwards the vessels and cargoes to potential charterers and shipowners accordingly. He negotiates with the principals mainly via Email and Instant Messaging (e.g. Skype) while the telephone is now used much less than in the past. The parties exchange offers via Email and after an agreement is reached, the fixture recap is prepared by the broker and sent to both the parties. Nowadays, since all exchanges and offers are made in writing, there is not the risk for the parties to forget what they have accepted and therefore the fixture recap is binding by its own and there is not that rush for the c/p or the fixture recap to be signed.

Recently we published an online survey named «Past, Present and Future of Ship Chartering», through which we collected fundamental raw data giving us useful insights into the opinions of key players in the market. From this online survey we realised that the main challenges today for the ship chartering professionals are:

  • — Massive amount of data but lack of accurate information (high quantity / low quality issue);

  • — Market imbalance;

  • — Lack of loyalty & respect between the market participants;

  • — Lower number of charterers and thus less business opportunities and clients to develop;

  • — High competition.

Our world keeps on changing and becomes more technologically advanced and ship chartering also adopts those developments. Have you ever imagined how ship chartering will be in 10 years from now? We addressed the same question to the chartering community through the above online survey and it seems that more than half of the respondents (55.60%) have already imagined a new environment with lots of changes in the next 10 years. Furthermore, half of our audience (50%) has experienced problems to source new clients in today’s environment while more than half of them (61.10%) think that changes and improvements in the ship chartering process are definitely required. New technologies have already made our life easier during the history and from telex, which 75% of our respondents found it to be a nightmare while the rest found it funny, we have been in the era of internet. In this respect, we have asked our respondents to advise what kind of new technologies are the most perspective for ship chartering. Almost 1/4 of them (22.2%) have advised that the most perspective technology is a ship chartering marketplace, the so-called “Uber of the Oceans” while another 22.2% think that the most perspective technology is one which is related with Analytical services. Social networks (e.g. linkedin, facebook etc) and messengers (e.g. Skype, Whatsapp etc) follow at 16.7% respectively. Our respondents were both new comers, with the 18.6% having experience up to 5 years and long-time professionals, with the 16.2% having experience of more than 30 years. The 44.18% of our respondents have previous experience of between 5 and 20 years and they are those professionals who have lived the whole current phase of the ship chartering.

Let’s also mention a few opinions as addressed by other professionals in our online survey:

— “Technology will produce a "disruptive" new entrant (like an Uber), which will strip away a number of the standard charters, hence reducing the throughput of the old fashioned personal style of shipbroker. Specialists will survive much as they have in the past.”

— “It will become fully or semi-automated with computers deciding which cargoes are accepted and for which ship/voyage with automated calculations and issues to watch.”

— “There will be data companies instead of classic brokers”

To summarize, it is obvious that the ship chartering changes and the chartering environment will be much different in the next 10 years, however OpenSea is already here. While the conservative shipping community keeps on concluding fixtures via emails, we have already built our complete marketplace. E-Chartering is the future in shipping: Companies can be part of our E-Community, find best cargoes/ships easier and fix quicker. This way, the utilization will be increased while it will remain time for more core activities, like analytical researches (which we are also going to implement soon). Therefore, from the telex in 1960s we have already come to the era of smartphones and OpenSea E-Community in 2016. But what is next? This is a lot of people’s concern and an issue of discussion in various International Forums and Conferences. In a recent conference organized by FONASBA, which I also joined as speaker, there was even a dedicated session and panel discussion about this important issue for the future of ship chartering. Let’s see below a few main points of this interesting discussion panel.

Discussion of past and future of ship chartering at FONASBA Annual Meeting London, 2016

Is the Shipbroker a Dodo, heading for extinction?

This is the name of the relevant panel discussion which was held at FONASBA Annual Meeting on the 19th October 2016 in London and where I was invited to participate as a speaker from the IT side, in particular ship chartering marketplace - (who is presumed to be a threat to shipbrokers).

That was an interesting issue for me, as soon as I saw a lot of similar discussions raised by our users as well as by our rivals. I have already seen very opposite opinions and business-models, some of them really believe that physical shipbrokers can be vanished and substituted by electronic-shipbrokers who will directly connect shipowners with charterers. I must say here, that both shipowners and charterers are really interested in such kind of collaboration, as we frequently see it in real life, when both parties are always happy to find ways to avoid shipbrokers.

However, despite the above, I have accepted an invitation from Mr. Fulvio Carlini, FONASBA C&D Committee Chairman, since I would like to tell shipbrokers that OpenSea is not a threat, but quite the contrary - this tool is very useful for brokers as well as for charterers and shipowners.

The issues covered particularly excite me as I have been myself a competitive broker for 7 years, during which I considered it to be my dream-job. Since I have started my career in brokering, many things have changed in the shipping, commodity and technology sectors, leading me to believe – and I say this very humbly of course - that the freight market will be dramatically changed within just 3-5 years. Let’s think of the evolution in communications and the huge improvements that our mobile phones have experienced within just one decade. Smartphones today are incredible devices and we all have one in our pockets. That probably happens because all of us want to be smart. We want technologies to simplify our lives, to help us manage all our daily routine and data overflow as well as to give us clear insights on 3 simple questions:

— What is the best choice for me right now?

— What is the current state of the market in my particular segment? and

— Where is my market heading? (i.e. what are the market trends)

Having said that, we realise that the chartering market has huge complexities, yet these same obstacles can be viewed as opportunities for improvement.

Therefore, my short answer to the question «Is the shipbroker heading to extinction» is: NO, I don’t think so.

Moreover, in our company we create and offer equal conditions for all market participants, while our system is even more favourable to shipbrokers who can place both ship positions and cargoes.

We all know that there are various situations where shipbrokers couldn’t be replaced as a man cannot ever be replaced in full by a computer. On the contrary, computers and new technologies should serve us in such a way so as to make our life and work easier. And this is the mission of OpenSea - To introduce the new generation of technologies into ship chartering.

Vasiliy Kotylevskiy,
OpenSea Founder & CEO

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