Smaller brokers squeezed

Clarksons believes it is becoming increasingly difficult for smaller shipbroking companies to compete in the market.

The world’s largest shipbroker has just seen its two London listed rivals, Braemar and ACM, merge to create what is arguably the second biggest company in the business.

Andi Case, Clarksons chief executive, wrote in its first half report today: “The increasing importance of equipping the best brokers with the best tools for trade, including research, analysis and technology needed to consult with our clients on their strategy and execute their instructions globally, has begun to impact the competitive landscape, where a number of smaller companies are becoming increasingly challenged, losing their ability to compete.”

Case’s comments came as Clarksons reported a 46% rise in first half pre-tax profit to 15.8m ($26.22m).

Clarkson’s shipbroking division saw profit climb by a fifth to £14.9m.

Upturn timetable

Case says the company benefited from the positive momentum and optimism during late 2013 and early 2014 to completed a significant number of second hand and newbuilding transactions.

“During the second quarter the momentum in freight markets stalled, and an upturn in vessel earnings is not now expected until September at the earliest,” he said. 

“This has essentially put a brake on sale and purchase activity across the board. Consequently, for the time being the bid/offer spread for most tonnage types remains too wide for meaningful business to be concluded on a straight charter-free basis.”

During the lull, the Clarksons period desk has been busy and is currently working on a number of sale-and-leaseback transactions which it hopes to conclude during the second half of the year, Case says.

Private buyers stepping forward

Clarksons' data shows 795 newbuildings were ordered in the first half of 2014, against 830 in the same period a year ago.

“Some of the capital markets backed investors are starting to show signs of saturation, having invested heavily in newbuildings to this point, but this has also made way for investment from private owners and industrial end users,” Case said.

“On the supply side shipyards are showing fuller orderbooks and there is now less immediate pressure to drive the competitive pricing needed to create more enticing opportunities.”