Why traders fail – You can’t run a Ferrari on fuel oil
As I sit watching a number of traders around me apparently failing (not just the large name being talked about but 2 small traders in Greece and at least 2 in Singapore), notices of assignment flying around the world and see the fear in ship owners eyes facing double payment jeopardy or at the very best a lot of time spent in meetings with their legal department I cant help but not have the sympathy for ship owners that one may expect.
I don’t lay the blame solely at shipowners doors, the selling companies have a responsibility to charge a fair price for their services to protect their shareholders, pay their employees a fair salary, manage the cost of finances and the financial risk associated with the particular shipowner. Market standards have declined and it’s a race to the bottom, large trading companies have to satisfy their banks and ensure that turnover is consistent – no matter what the margin. We see from the published accounts of WFS that an average margin of $10+ pmt has been achieved and is steadily increasing – considering all the costs and the risks being taken I would even argue that this is on the low side but i respect this is moving towards sustainable..
So why do buyers shoulder a portion of the blame? I was always taught growing up that you get what you pay for and if you want quality then this is what you must pay for. Buyers have driven desperate traders down to margins that just don’t make sense, levels of $1pmt don’t even cover the most basic costs, but traders when forced will take it on the hope that when that next enquiry comes around that they are the only ones that can do they are still on good terms with the owner and can take advantage. We are seeing traders increasingly not able to pay the supplier until they have been paid by the owner (several cases of this in the Greek market).
Buyers should take a long look at themselves in the mirror this morning and consider what has been their role in the market decline and are they really protecting their principals interest in achieving such a low price that comes with the risk of questionable product origin, quality and now double payment.
My advice – take a step back – think about the credit standing of your company – think about the cost of finance – think about what risks you want to mitigate – Next time you think a traders $10+ margin is unreasonable I would advise you to use the shipowners money and finance the trade yourselves.
The market is broken and cannot continue like this. The Casino mentality must stop – buyers are gambling with their principals money not their own!
By Jesper Olsen, a concerned market participant
(Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and don’t reflect the views of Hellenic Shipping News Worldwide)