¿What is the difference between brokers, traders and physical suppliers of marine fuels?

Daniel Bosch Wood

Maritim Lawyer

LLM Southampton

Las Palmas de Gran Canaria

Clearly identifying the counterpart makes a key difference in the negotiations The confusion between a broker, a trader and a marine fuel supplier is “surprising and risky,” says Pedro Vergara, managing director of ABC Bunker Oil, who explains that the reason for this is that some traders and traders- suppliers “have tried to combine both functionalities in order to optionally be given the broker category one day, trader or simply as a physical supplier to the next. “In this complex market, the lack of knowledge of customers introduces risk in their purchases. This is where a broker or broker can help, “says the executive.

Vergara points out that brokerage is not a new or complicated model and “has existed for hundreds of years because it efficiently provides a value-adding function to buyers and sellers who often have competitive but mutually-needed goals.”

Bróker vs trader

Brokers-brokers or intermediaries have among their tasks to bring together buyers and sellers, negotiate, fill key information gaps and facilitate operations smoothly, providing service to the vessel from market research to subsequent delivery. They do not take credit risks, they do not buy or resell fuel.

Vergara, indicates that a customer when dealing with a broker should take into account that: You will never receive an invoice from the broker-broker, but exclusively from the physical vendor / seller; has no financial obligation to the broker; if the broker leaves the business will have no financial or legal impact.

In addition, the broker must inform you about physical providers and vendors, helping you establish a credit. “Information is the currency and value added of the broker,” he says.

On the other hand, traders or traders buy and resell, adding margin to offset credit risk, country risk or profit on the sale of crude barrels in contracts. It is a value-added service, but it is very different from a broker or broker model. “If a company sends an invoice and the name of the delivery company in the BDN / BDR is different from its name, they are marketing their fuel,” he said.

Key: Know the counterpart

Vergara recommends “to understand how you are buying and to whom. The selection of the counterpart must be based on the experience, the knowledge of how it manages, operates and self-financing. This is the information that intermediaries can provide. ”

The executive says that “brokerage is the right solution in today’s market,” because of the transparency and the specialized service they provide.

“Many buyers mistakenly assumed the security afforded by their counterpart because it was a large hybrid marketer / supplier before the collapse of OW in 2014 and Bunkers International in 2015”

“It is already known among the shipping companies the risks involved in the bankruptcy of both trading companies, especially in the action of double payment of invoices, determined by judges in different courts of the world, to save the possible rooting of ships,” adds Vergara .

The executive details in retrospect that “these companies had significant deficiencies in their risk management policies, business approaches and financing. All security levels were shaken. For this reason, now more than ever, real information and expert perspective has a tangible monetary value, especially when it comes from a neutral market broker whose incentives are in line with those of shipowners.”

He adds that as the world specializes, brokers perfectly fill the growing need to outsource to buy cheap, smart and low risk. “They add volume, knowledge and assess the reliability of the physical supplier, the quality of the fuel and the flexibility to inform its customers,” he says. It also explains, suppliers get valid feedback on their competitors and reliable feedback on buyer activity and relationship with other counterparts. “This level of knowledge and access is difficult to replicate ‘in house’, as few companies in the world manage the level of coverage and scale of business managed by a broker or broker,” says Vergara.

A false illusion 

The executive explains that when markets are weak, cutting the broker may seem like a boost in the cost-adding line. Even the most simplistic thinking can multiply the standard brokerage commission ($ 0.50 / tm) and get a saving. “Everything sounds too good to be true and this assumption has many flaws,” he says.

He states that “most industries outsource specialized functions to the experts who do it faster, better and cheaper, creating more agile organizations. In fact, many domestic buyers have other tasks and struggle to keep the focus and pace on their purchases in all time zones.” Vergara explains that negotiating with suppliers is easier when an intermediary can handle conflicts and establish good long-term relationships.

“Runners can also be responsible for Key Performance Indicators (KPIs) more easily than a coworker who sits next to them every day as they will not have a political leaning on each response. As a result, prices will be better over time through a broker-broker, “says Vergara.    The executive says that the ability of a specialist to excel is clear in all areas of our life, so he points out that “brokers-brokers are better equipped than ever to meet the varied needs of customers and have evolved to care more intelligent, more efficient, with greater training in the use of technologies and more transparent in accountability and service delivery. Concentrating on these qualities his value proposition. ”

“With information comes the choice,” says Vergara, who finally points out that “many vessel owners and charterers would be well advised to check whether their bunker buyers or operators know how and what they are buying. Many do not know, which means there is an opportunity to buy more intelligently and securely with a broker, since buying without all the facts in sight can be an expensive alternative. “