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Feature: Japan’s Seaservice to close tanker brokerage division amid headwinds

Seaservice, one of the oldest Japanese shipbrokers, is closing down its brokerage division — once again bringing into stark limelight the tough times the tanker sector is facing as freight rates plummet and owners try to bypass their services.

Several shipbrokers in Japan, who are now well established elsewhere, started their careers with Seaservice, which has been in the business for almost 35 years, having set shop in 1983.

Seaservice is withdrawing from ship broking business on March 31, the company said in an e-mail last week to its clients, a copy of which has been seen by S&P Global Platts.

“The ship broking division is closing down but the company will continue to be active in other businesses such as real estate and cosmetics,” a Seaservice tanker broker told Platts Wednesday.

While the company did not cite any specific reason to halt its shipbroking business, market participants said that it was illustrative of the hard times many brokerages have fallen into amid abysmal freight rates and the advent of new technology which makes it far easier for owners and charterers to skirt their services. The Seaservice broker also attributed the closure to a fall in business volumes.

As Japan’s refining capacity dwindles, the overall trade is taking a hit and therefore the shipping volumes are also affected, which in turn has dried up the business for brokers.

“The refining capacity is shrinking here, the volume of middle distillate exports is also falling, which could have shrunk their business,” a Tokyo-based chartering executive with a global commodities trading company said.

Since 2009, Japan’s refining capacity has declined by around 28% to 3.52 million b/d, according to industry estimates. Amid an ageing population and greater demand for electric vehicles, the demand for oil products keeps declining by around 1%-2% annually.

Japan’s oil product sales declined by 1.3% last year, according to provisional government data.

In regions where demand overlaps, the refining companies are trying to cooperate by reducing refining capacity. A case in point is the partnership between Showa Shell Sekiyu and Cosmo Oil in the Yokkaichi region where both the companies operate refineries.

In the past, Seaservice was a major broker for clean product tankers, among others, and boasted of clients such as NYK, the chartering executive in Tokyo said.

“Shipbrokers in Japan are past their golden years, as spot chartering business is hard to come by,” a Singapore-based VLCC broker said.

Most oil trading companies in Japan have ships on long term time charter and to make matters worse, in recent years, they have been fixing ships directly with owners, without availing the services of brokers, he said. This isn’t surprising as the owners are desperate to cut down costs to at least partially offset lower earnings.

The Long Range II, or LR2 tankers, rates are currently hovering around their lowest levels so far for the year, earning barely $4,600/day for a round voyage on the benchmark Persian Gulf-Japan route, according to the estimates of brokers.

There was a time when charterers in Japan would re-let their time-chartered ships and take others from the spot market to optimize costs and cash in on the arbitrage. This rarely happens nowadays, sources said.

“It is hard for a broker to sustain in Tokyo without a robust spot chartering business,” the VLCC broker said, who has been in direct contact with his Japanese counterparts, including those in Seaservice.

CONSOLIDATION MAY SAVE JAPANESE BROKERAGES

Market participants highlighted the need to change with the times.

Many brokers in Japan were only focused on VLCC spot chartering, a segment wherein the volumes have been declining, a dirty tankers’ broker in Tokyo said.

“There is lot of other [non-VLCC] ship brokerage business that can be done. The market has changed in recent years and the brokers must change as well,” he said.

Japan’s crude imports fell 2.4% last year to around 3.23 million b/d, according to provisional government data. This in turn has hit the volumes moved on VLCCs, which typically carry upto two million barrels of crude each.

One of the senior brokers with Seaservice left last year, while some of the Seaservice brokers felt the need to retire. With no infusion of new blood, the company is now closing down, he added.

After the closure of Seaservice, Japanese brokerage circles are not ruling out the possibility of consolidation, as smaller ones maybe absorbed by larger shops.

In the tankers’ segment, for considerable time now, Japan has had close to 14 well-recognized brokerages but some of them have barely one or two clients.

One view which is gaining ground is that since the oil companies that the brokers were catering to have merged, they should also follow suit or else their survival will be difficult.

JX Holdings and TonenGeneral Sekiyu merged last year and in the process, restructured production and cut down refining capacity. Idemitsu Kosan and Showa Shell Sekiyu are also trying to integrate, though the process has got complicated because of the bitter opposition of Idemitsu’s founding family to the move.

Consolidation among international shipping brokerages is already happening.

In February 2015, international shipbroker Clarkson completed the acquisition of RS Platou ASA, an Oslo-based investment bank and ship brokerage. A few years earlier, RS Platou had explored the possibility of merging with London-based ACM Shipping Group PLC. According to market sources, the offer was spurned.

In 2015, UK-based shipping brokerage house Braemar acquired ACM. In the same year, Howe Robinson Group, a leading ship brokerage merged with ICAP Shipping, the shipping business arm of ICAP Plc.
Source: Platts

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