SHIPS AGENCY

White Paper

Shipping has changed ships agency must change too

By Frederic Fontarosa, Business Director, Ships Agency
Although often described as a conservative industry, as well as being highly cyclical and
capital-intensive, the shipping industry has changed enormously over the last few decades.
The business of ships agency has not always kept pace but it too, will have to face the need
for change.
If we go back 30 years, the shipping industry looked completely different to today. Global
trade was also at a much lower level than it is today. In 1980 world seaborne trade
amounted to some 3.7m tonnes but since then the volume has doubled.
Trade patterns have changed too, along with the globalisation of production and trade, with
China replacing the US and Europe as the main drivers of both import commodity demand
and consumer goods exports.
We now live and work in a world where vessels have never been more environmentallyfriendly while from a communications perspective, the industry has moved from using
expensive voice, telex and fax channels to cheap phone calls, widely-available email and
integrated, online IT applications.
Consolidation and competition
At the same time, the trend towards consolidation has continued, albeit at different speeds in
different sectors, meaning some markets are dominated by fewer players and others still
have highly fragmented ownership.
The basic role of a ships agent is to act as the owners legal representative in the port of
call, looking after his interests, co-ordinating the commercial operation and vessel husbandry
needs and ultimately paying the relevant vendors on the owners behalf.
Given the tight relationship between the owner and the agent, one would assume that the
structural changes in the shipping industry noted above would have greatly changed the way
ships agents operate. However, for the most part this is not the case.
Whilst the shipping industry has seen some consolidation, ships agency is still largely
dominated by small and often family-run companies. These local companies are normally
represented in one port only and seldom have the financial capability or the desire to expand
into more locations. Their strength very often relies on relationships with the various local
stakeholders and suppliers in the port.
And though the main driver behind consolidation is normally a desire for economy of scale
and improved efficiency, small ship agents are normally unable to achieve either. They are
hardly likely to, since achieving these two goals requires the investment necessary to build a
network of offices, the development of efficient and integrated IT systems and high quality
personnel training people at the very least.

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SHIPS AGENCY
White Paper

Despite this, the majority of ships agency business is still handled by small independent
agents. What does this means for shipping companies whose operations are increasingly
global?
From local to global?
On a day to day level, it means that ships operators have to deal with a large number of
different agents for their different ports of call. This directly affects the efficiency of the
owners back-office administration and can even affect the efficiency of their vessel
operations.
It stands to reason that this results in time-consuming follow-up with myriads of individual
agents. In tramp trades, vessels will often call a port where the agent they have appointed
are not familiar with the unique requirements of the operator. As a result, time is wasted in
ensuring the requirements are understood and properly followed.
Because of the global nature of the business, ships agents are often located in a different
time zone to their operators. Communication across time zones rather than between local
offices leads to delays in response time and the risk of missed communications. It is not
unusual to receive a response 48 hours after an enquiry has been made. Furthermore, in
some countries, simple issues such as the language barrier can also be an obstacle to an
efficient communication between operator and agent, making the process unnecessarily
complicated.
Very often each ships agent will use a different IT application to support their services,
which will have different functionality and reporting formats. As a consequence, the operator
of the vessel has to deal with different information types and reporting formats received from
each port, even if the data is basically the same.
Competing or losing on price?
Finally, but arguably most importantly, each agent has their own way of pricing the services
so the price to the shipowner can be highly variable. Consequently, operators frequently
waste time negotiating prices in advance and thoroughly checking disbursement accounts
afterwards to search for hidden costs.
The oil majors were the first to identify the challenges of the ships agency system and
propose a solution to what they regarded as a non-core task. The hub agency concept, in
which the entire ships agency process is outsourced to an external supplier evolved as a
response to the time and cost-consuming follow-up process with ships agents.
However, whilst hub agency might reduce some negative effects for the operator, it does not
solve the core issue but merely passes it on to the Hub agent. Hence, the fragmented
market in which ships agents operate has persisted and constrained innovation and
development.

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SHIPS AGENCY
White Paper

The fact that the main drivers which influence the choice of ships agent by an operator are
price and personal relationships should not be a surprise - this is typical for a nondifferentiated market.
However, with a trading environment of low earnings, tight credit and high costs, ships
agency needs to evolve. The profile of a typical ship operator is changing from one of having
a classically maritime background to having a more business-oriented outlook and approach.
Consequently, the requirement to work peer-to-peer with a reliable expert in ships agency
has never been more important.

For more information, see www.wilhelmsen.com/shipsservice or contact

wss.marketing@wilhelmsen.com

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