I work for a sizable dry bulk operator engaged in freight trading / chartering - ask me anything. Due to the nature of the industry, I won't be able to answer questions that are too specific but will try my best to provide insight where it seems fitting to do so.
Thanks
Less than 10 years. :)
Major changes I find interesting :
- The lack of willingness from banks/funds to finance newbuilds in comparison to the super cycle days of the 2000s. This is partly due to environmental regulations changing so fast that the ship of tomorrow might be completely different in design compared to today. Most players are now more or less targeting 2nd hand tonnage, which is a great trend given we've had supply overhang for the most part of last decade.
- In contrast, the willingness from funds to finance small operators - many small operators go under and many news ones emerge almost every year. Money is free these days if you have a nice idea to sell!
- Much more investment into research and data roles. Though I always think this market is too dynamic to really use algorithms and such to predict rates, there are definitely a lot of industry "leaders" sold on the notion of added value through data. So far this has yet to be proven. But other data sets such as tonnage supply, seasonality trends and even weather forecasting definitely helps optimise calculations in ways we couldn't before.
- More engagement in shipping overall from smaller stakeholders. By this I mean smaller commodity producers (that would usually rely on trading houses or the receivers to handle the freight) are now actively trying to manage their own requirements if they can save money doing so.
Ref Suez canal - crazy incident. It definitely sparked up some rates on the container/tanker side, but on the dry bulk we didn't see too much of a push other than a slight spike on the FFAs. In a weird way, if the incident was prolonged the added ton-miles to the industry as a whole would've definitely raised rates a step upwards. It does raise a question as to how they let that ship pass through there in the first place... 400m loa and 60m beam is a big piece of work and I wonder if the canal authority may have to revisit restrictions in the near future to avoid another scenario like this.
Do you see yourself staying on your side long-term? Being long cargo seems like it would be easier, and it's not clear to me you get paid any less at one of the big commodity traders or miners.
I may be a bit biased but here it goes. Most people I see who start on the tonnage side / cargo side tend to stick to that side of the fence for the long term. My understanding (I could be wrong, just from the chit chat I gather in the market) is that there are usually two types of roles on the cargo side. Some roles will have you driving third party business (usually more senior positions - taking in period tonnage, booking forward cargoes, clipping margins on spot market deals etc. almost the same as an operator basically) or running and optimising a large internal book (more to do with developing freight strategies to compliment the trading desk). On the other hand, a number of roles are assigned to working alongside the commodity traders in order to win tenders / develop sales, which could still be interesting (in terms of understanding the freight component when selling/buying the commodity itself) but in the long run apparently is quite dull and you are just looked at as a pricing mechanism rather than a core part of the trading team. So whilst money might be there for those who can run a profitable book (as it would be for any operator), I don't think the majority of non-senior freight roles on the cargo side pay that well in comparison to working for a tier 1 operator (although I'm sure it won't be that much lower). Working freight at the larger companies is easier to the extent where you would really specialise in one, maybe two particular commodities, a few key ports, limited trade routes and basically using the same executed/pro forma charter party. In contrast, at an operator, you are pricing almost everything in a particular region depending on where you sit and generally get great exposure to a variety of commodities from a range of companies across a mix of trade routes all with different charter party terms which you have to negotiate all the time - which yes seems harder, but at the same time really enhances your knowledge on contracts, your understanding/ability to price freight, your network, and therefore your overall value and job security within the scope of chartering. The skillset difference is even more noticeable when comparing operators vs some mining companies (where they are literally selecting the best voyage rate, irrelevant of the time charter equivalent) - which is why we tend to see more "charterers" in industrials/miners leave to join operators (at a similar level of seniority I mean). Though again, it really depends on the skillset you want to build ie. do you want to understand more about the commodity you're shipping and optimise an internal book based on just looking at $/pmt OR actually specialise in freight trading (third party cargo book vs third party tonnage book) by having a good grip on the time charter market. For me it's more the latter. Ultimately, it just really depends on the role on offer on the cargo side (if you're running a third party book and can use off market internal cargoes to compliment your platform - that could be interesting). Something to note though is that we are generally seeing more operators in the market taking more third party (voyage) biz these days than the trading houses (only a select few trading houses are still involved in third party, but others have actually scaled down to focus on internal book mainly).
Do you do much paper?
I don't but other desks do. I am mainly involved in geared segments (smaller tonnage) where I think FFAs are more relevant to the capes/panamax desks. We do at times take small paper positions but it's more of an attempt to balance cargo days vs tonnage days (a hedge). In short, it's way more physical.
Do you think there is room for more companies like SwissMarine to start up? The fact such a big player could be built so quickly is incredible to me.
SwissMarine had some pretty good backing and they hired people who basically coined the term "freight trading" (all ex Cargill people, they knew what they were doing). They had an established network (particularly in coal) and basically built off that straight away. We have seen one or two other players in the last decade emerge to be running a pretty sizable third party fleet but I won't mention any names. It really depends on the people backing the firm (I think SwissMarine had Glencore, Victor Restis (billionaire) and Macsteel with decent investments). Some newer operators generally want to cap their size to focus on what they specialise in and build more risk adverse operating models to generate low but safe returns. But yes it's entirely possible, it surprisingly doesn't take that much investment to quickly build up a decent time charter fleet. On the flip side if that business burns cash quickly it'll be over like any fly by night entity.
Are container rates putting a lot of upward pressure on the smaller end of the market?
Good question. Short answer is yes - due to the high container rates we have seen a net positive effect on geared sizes as cargoes that traditionally went to containers are now going in bulk. The general consensus is that this is expected to continue throughout the year and perhaps even into 2022. Whilst it has had an impact, I would say most of the pressure is coming from general demand of minor bulks and grains (the container rates are just the icing on the cake).