Signs have emerged of a brewing price war between shipbrokers in the forward freight agreement (FFA) market.
Rivals and traders claim two new market entrants have slashed commissions to win business.
John Banaszkiewicz, founder of Freight Investor Services (FIS), said two well-established shipbrokers which have recently opened to derivatives market business have cut rates to gain a foothold.
“There are two ways to win business when you join a market. One is to try find new clients and add value, and the other is to win business off others. That’s what’s happening here.
“It’s a pity,” he added.
Banaszkiewicz was speaking on the sidelines of a Baltic Exchange Risk Forum held at the Yacht Club of Greece in Athens to promote the exchange’s services to the world leading Greek shipping business community.
Philippe van den Abeele, founder of investment fund Consortium Maritime which trade in FFAs, confirmed that commission rates had been cut after the arrival of the new brokers.
Commissions are now as low as 0.1% having been double that, one market player commented. There is no immediate sign there has been a surge in FFA business agreed since the cuts took hold.
Arrow and Braemar ACM are believed to be the two brokers leading the fight for market share, but this has not been confirmed.
Brian Nixon, managing director of Lavinia Bulk, said the problem was symptomatic of a deeper underlying problem.
“The market is over-brokered. ICAP has gone last week. We need to get some consolidation between brokers.”
Earlier, Baltic Exchange chairman Mark Jackson had underlined the pace of change in the institution and its services, less than two years since it was bought by Singapore’s SGX.
“It’s quite an exciting time at the moment at the Baltic with the new ownership,” he told the audience of owners and brokers.
“We’re strengthen our services to members, and giving you new tools to business.”
