Are you overpaying your bunker broker?
“The offer price is XXX per metric tonne. Add on commission for yourself”.
This is how most bunker brokers receive offers from physical suppliers.
In an unregulated market, this last sentence opens up an opportunity for the broker. They had agreed (with the bunker buyer) to a fixed commission of $1/mt, but what is stopping them adding $2, $3 or $4 per tonne? How will the buyer ever know?
If they manage it and the ultimate price agreed is X+$4/mt, the broker will invoice the physical supplier for $4/mt after the stem – a piece of the deal that the buyer never sees.
The whole dynamic of the trade has changed. The broker now benefits from selling at a higher price.
Is Trust Enough?
Brokers work on trust between them and their client (the bunker buyer), but it would be naive to think they don’t have enough of an incentive to sell at a higher price. It also raises other questions: Has the broker really covered every reputable supplier for a stem, or might they be favouring some over others? Have they exhausted the market to know they hold the best price possible?
History shows us that the more long-standing the relationship, the more ‘blind trust’ is built and the greater the opportunity to abuse that trust.
This is not specific to the bunker market. Insurance brokers used to undergo the same practice, but then the insurance market became regulated and the brokers had to cap their commissions to an amount set by the FCA. The bunker market however, remains unregulated.
So, how can shipping companies combat this?
Go direct to physical suppliers instead, however brokers are still essential in today’s bunker market. A good broker can save shipping companies millions over time by advising them on the right time to purchase, what to watch out for in certain ports and by picking the right supplier – both for their price and reputation. It’s the job of a broker to have their ear to the ground, allowing their clients to benefit from any valuable information. Savvy brokers can be worth their weight in gold.
Use a trader instead, however due to the increasing risks coming to light of using traders, more and more buyers in the industry are turning to brokers. Traders also aim to sell as high as possible to buyers, along with the added risk that they are not the physical suppliers (think OW for the problems related to that). It’s for this reason that a broker is generally viewed favourably by their clients: someone who knows the market so can negotiate on your behalf, and who will jump on the phone at 3am to sort out your claim. Someone with the experience to cover the market well and pass on all the information they have both quickly and accurately.
That’s why we created BunkerEx – the only brokers in the market where you get the same service as traditional brokers, but with a fully transparent view on everything that goes on. Although we guide the way, we put you in the driving seat meaning nothing happens without the buyer seeing it first. We vett and register all our suppliers, show the buyer who they are and then ask them to offer directly to the buyer via our platform (have a look at the screenshot below). This ensures we can’t take any extra commission. It gives the buyer all the service of a broker with the price of going direct.
Our trading screen shows offers directly from our physical suppliers whilst ensuring competition and sufficient market coverage. Supplier names have been omitted in the above example.
Our research indicates that traditional hidden brokerage fees might add up to 3-8x more than the original commission – a high cost to bear by not having a transparent view.
Our technology does all the heavy lifting that traditional brokers usually do, leaving our brokers to spend more time on providing a great service.
It costs buyers nothing to give us a try – that’s how confident we are in our service. We only take a commission from the supplier if an enquiry is stemmed and the fuel is delivered without dispute.
BunkerEx is the world’s only transparent bunker broker. Try us out today by getting in touch at firstname.lastname@example.org.