POST DOTCOM ELECTRONIC CHARTERING APRIL 2002 The past three years saw the dot-com boom and dozens of sites with a “chartering” components, followed by the inevitable crash and shake-out, inexorably moving into the present consolidation phase where even erstwhile rivals have joined forces. Once the net bubble burst, common sense and reality moved back in, allowing the gladiators and crusaders still standing, although bloodied and maimed, to get on with real business. But, you need to define a business before it can truly move online. Yet, the prior three Millennia created a business perceived differently by each of its thousands of participants. Not surprisingly, chartering’s centuries-old tradition of non-definition is reflected by the wide array of company missions in the innovative cyber world. At one extreme is an all encompassing approach from pre-fixture to post fixture. Contrast this with the niche approach where particular applications or processes are handled online. Several factors have characterized chartering’s movement online so far: · Established incumbent players (principals, brokers, existing vendors) have succeeded where pure start-ups have not · Existing print content (news, directories, reference guides) is better left to publishing outfits as online chartering (however defined) deals with business processes. At least, for now. · Evolutionary non disruptive advancement in business applications work better than upheavals in business practices. · More structured discrete business processes, or commodity cargo routes, are better suited to the online venues. · Small market niches and communities can be tackled more easily than “40,000 ships” and “$200 Billion of annual freight”

When you try to distill the shipping business down to its essence, it is really about “community”, defined in Parker’s Shipping Cyber-Dictionary as “a group of business partners, often geographically dispersed, who must share information, before a fixture, after a fixture, and during the negotiation of the fixture”. The concept worked in a clunky way during the days of cable brokers, and it worked better with telex and then fax. With the internet and the ability to assimilate digital data from varied sources, some of the successful players have taken their vision of community and transformed it online. The talking three years ago about saving commissions through disintermediation, or about fixing more quickly, has been replaced more talk about collaboration and more comprehensive and efficient information exchanges. One of the oldest institutions in the shipping world, the Baltic Exchange, began life in the 1700’s as a coffee house where shipowners and merchants congregated. It has moved online with www.BalticExchange.com , with a hope of serving its members, generally U.K. shipbrokers as they move online, and, importantly, as a magnet to attract new members. The old physical marketplace, on St. Mary’s Axe, has now created a web-based service for exchanging brokers’ messages, sorting lists, matching ships and cargoes and even accessing basic ship descriptions from a leading seller

of such information. Towards the end of its free trial period initiated last year, about 450 companies (half members, half non members) have been on the site, with an estimated 300 coming on every day. The site is also a conduit for disseminating fixture and market information published by the Baltic Exchange, including four new daily market reports that have been attracting a steady stream of users. The Baltic’s daily route quotes are widely referred to by the marketplace, and an online arena for trading forward freight, based on those route quotes, is expected to come online in the early Spring.

trategic Software began life as Micro Marine with advent of the first PC's in the early 1980's.

he positions and cargo order exchange is supplemented by the facility to manage an online

ontinuing the community approach, StrategicIMX launched E-Jan/DryBulkIMX, in partnership

terestingly both the Balticexchange.com and Strategic have shied away from developing

writing this article, I was fortunate in having a chance to speak with Mr. Richard Hext, the CEO

large and well known charterers, owners and brokers. LS, with its headquarters near the Old

SBased in Clerkenwell, in a fortress-like setting reminiscent of the Knights of St. John, it has since become the mainstay of broker packages, and crept into the marketplace for owner/operator applications. Last year it brought its closest competitor- Dataworks, whose founders broke away from Strategic in the late 1980s, back into the fold. With its messaging platform and ship sorting package onboard as ballast, it launched TankerIMX last summer, an advanced system serving private communities of brokers, enabling them to post and manage vessel positions and cargo requirements with either existing Strategic and Dataworks systems, or directly through a web interface. Tvoyage file, capturing voyage data at source and sharing key voyage particulars with other parties in real-time. Significantly, IMX pulls in vessel data from a related company, MaritimeData, based on which brokers are able to centrally manage and confidentially exchange vessel positions with their counter-parties. Unlike the others featured in this article, Strategic took the decision not to develop a negotiation module. "For the best part of 20 years we have developed technology to enable the shipbrokers to reduce repetitive manual tasks," said Peter Andersen, business development director for IMX. "Our ability to integrate our clients' existing positions systems with our internet applications enables our customers to reap the benefits of web-technology without having to go through significant systems changes, with the disruptions that are inherent when you migrate from an established IT platform to a new, untested system." Cwith Japanese drybulk interests, late in 2001. Strategic, recently announced that a sister company, Softmar, will be launching VesselOps, an integrated back-office post fixture and voyage management system, developed in partnership with the Danish operator Armada. Clearly, as Strategic spins out the operational suite, the target will be ship owners and operators, increasing the Strategic family's penetration into the segment. Incapabilities to conduct actual fixtures online. Indeed, Strategic’s Peter Andersen pointed out that earlier e-business models with fixture commission revenue have been altered to reflect a software subscription mode. Both have expressed the view that their customers, mainly brokers, view fixture negotiation as the ultimate core competence of brokerage activity. Clearly, an overlap exists between the activities of these two players, both of whom operate communities and also offer tools that can aid others in building their own venues. Mike Elsom at the Baltic acknowledges that , “…brokers are unwilling to use, and update, <multiple> systems…” While not offering any specifics, Elsom says suggests that the problem is being actively worked at the Baltic. Inof LevelSeas, a consortium of major owners and charterers and probably the best known of the “private communities” in the marketplace. Originally announced two years ago with Shell, BP-Amoco, Cargill and Clarksons as the original backers, the LS roster now includes more than 30

Bailey in London, has taken the most ambitious approach in the marketplace, with its “Life of Voyage” concept spanning the earliest phases of a cargo requirement or ship position through fixture negotiation and recapping and then through post fixture management and vessel monitoring.

LevelSeas, online at www.LevelSeas.com rests on two key pillars: LSX (LevelSeas

he development of its numerous inter-locking emphasized that negotiating with firewalls, unique

t iccups were overcome and a good team was built that can talk the talk of both corporate IT and

ments of industrial shippers, this one in the etroleum markets, is www.ShipIQ.com , originally built around the business of Spanish

m , an independent ompany initially nurtured by Barry Rogliano Salles (BRS), a multinational broker headquartered

The road has not been without pot-holes in tmodules. In conversations with Mr. Hext, he

Exchange) is where ship and cargo positions are managed and where negotiations are done, ships are vetted and subjects are cleared and recaps are generated. LSOps (LevelSeas Operations) includes post fixture modules, collaboration features (ie agents can input information remotely for laytime calculations) and will eventually enable voyage calculations and execution files to interface with companies’ diverse accounting systems.

protocols and bandwidth issues of large company networks has been exacting and time consuming. On the human side, Hext points out that a certain comfort level, not earned overnight, is required in conducting mission critical processes over the Internet. However, a handful of fixtures were booked on LS late last year, including in the S. Africa to North Europe coal trades. Reflecting on LevelSeas progress to date, Mr. Hext views 2001 as a year where developmenhcorporate supply chain management. I asked Mr. Hext about negotiations online, and whether the old fashioned way was easier or not. He was quick to point out that in the large company environment, where many people (sometimes on different continents) may have input into a charter, and complex clauses are being negotiated, the ability to provide online status reports and a collaborative platform (including within a large multinational organization) is invaluable. Summing up, Hext says, “It’s all about teams.” Another community built around cargo movepcharterer Repsol-YPF, but now developing a stable of outside clients. More so than other online companies, Boston-based ShipIQ has overcome the very human problems of blending the ex oil traders and tanker veterans with the techies and Ivy educated analysts. Development has been ongoing since its formation in mid 2000, J.P. Savant, an executive at ShipIQ’, suggested that “ clients <both charterers and owners>, seek quality information, control of the chartering process, control of confidentiality, flexibility in business process, and efficiency of documentation generation and handling.” ShipIQ is built around a user friendly negotiation/ transaction engine tied to a program that can match up listed cargoes and ships. The website offers a well done newsfeed of relevant articles, market reports and thought pieces- including a recent article about fixing forward petroleum freight online, an arena that ShipIQ hopes to enter. The community approach is alive and well at AXS Marine- www.axsmarine.cocon the Champs d’Elysees. Not surprisingly, the market for large coal shipments, with commodity-like characteristics, is also a target, considering the prominent coal desk at BRS and at partner Fearnbulk. As both companies are spread across continents in order to work best with charterers, the ability to collaborate among offices and to work efficiently on negotiations and on post fixture followup has been a key driver in the development of AXS.

According to the top man at AXS, ex-derivatives broker Fabrice DeMichel, AXS

m th oteborg-based Swedish shipping giant Stena, and concentrating on fixture recaps that are in

mmunity systems is that if one e-venue does not garner the entire arket (which is now accepted as a given), then how do the various systems talk to each other?

e one of those “chicken and egg” things that most participants would ay are needed, yet no one participant or group of participants would do the hard work of building

nning tanker pools that serve major oil charterers, with offices across four continents), “…we

Another outfit worth mentioning is www.Chinsay.co

“…allows the principal and his brokers to structure and work in a dedicated private environment…”. The ability to sort and share lists of tonnage, for example, makes both the principals and the brokers more productive. Large brokers working with industrial shippers (such as BRS or Fearnleys) are often required to provide detailed analytics and possibly price risk management. Thus AXS is linked in with proprietary voyage calculators joined, in turn, to the brokers’ freight derivatives desks, where forward freight rates from the FFA market can be zapped directly into the top line of a freight calculation.

, a Swedish outfit working closely wiGturn used to generate charter parties that can be made available online. Chinsay, already working with brokers in the USA and London, and with a major agent network, hints that more functionality is on the way. The over-riding issue with comLurking in the background is a movement towards standard descriptions of ships and standard online chartering terms. In a fragmented industry, it is not clear who should develop these standards. In one camp, the Maritime Electronic Commerce Association (MECA), coming off some early success with an XML schema for procurement, has begun promulgating Maritime Chartering Markup Language, a data scheme for organizing ship descriptions, voyage files, and post fixture information. Standards such MCML arsthem. There is a great advantage to the entire industry in having standards, most likely using XML, yet little incentive exists for any one company to develop the standards. Balticexchange.com’s Elsom says that the cooperation of all the online venues would be needed, and perhaps the Baltic, being neutral, may have a role here as a facilitator in conjunction with MECA. LevelSeas’ Richard Hext says, “It makes huge sense. We are supporters of what <MECA> are doing, as are our shareholders.” This sentiment was echoed by others we talked to. In the words of Fritz Heidenreich, who manages the IT efforts at Heidmar ( a ship operator rudon’t want the standards for their own sake, we need to communicate with our customers and partners…”. Phil Van Bergen, the Director of MECA’s Secretariat, describes a scenario where a dedicated group, including Heidmar, have allowed their IT staff to spend time on a first draft of MCML, and what is required now is feedback and suggestions for modification and improvement. Since tankers are a fertile ground for the new XML chartering protocol, Intertanko is watching with interest through some commonalities of MECA’s Chartering Committee and Intertanko’s IT Committee, but is not dipping its toe into the waters, in a visible way. Where is the business going? Future trends we see are:

· The business is continuing to move online. There is room for all of the players profiled here, and

Alliances between specialist tools modules and bigger community sites will increase. Heidmar,

Data exchange between chartering applications, possibly using standardized ship descriptions

Data exchange with regulatory and Port State applications for tracking and clearing ships (see

HE FUTURE OF FORWARDS Summer 2001

aritime e-commerce is now so totally “business as usual” that it even picks up the same

very 1999 approach to the maritime webspace would suggest that a tanker market falling down

ctually, the early onset of summer doldrums provided time for a dialogue with the team at

others, as different target segments have different requirements. A two man brokerage shop has different needs than a multi-office broker which, in turn, has different needs than a big industrial shipper or an owner serving large charterers. · with Q88- its tanker vetting application, has linked up with ShipIQ, Chinsay and others, for example. Strategic’s decision to spin its offspring Softmar into a separate company may be a harbinger of modularity to come. The Baltic’s Mike Elsom says, when asked about including calculator programs into its online suite, says, “…we would not want to re-invent the wheel…” and goes on to suggest an expectation of hooking up with a “respected supplier,” if the decision is made to offer calculation capabilities. · under development at MECA, will begin. A publisher of directory information (ships, ports, distances) fitting the emerging standards, or even promulgating them, may garner additional market share relative to competitors. Perhaps the Baltic Exchange has a role to play here in coaxing the information suppliers in this direction. · article on Page ___ regarding Maritime Security) is under discussion. Protocols do not yet exist. XML standards will help all concerned. T Msummer doldrums as the underlying market. Our friend JK was lamenting, on his heavily trafficked site, that there was little humour in June (although the investment bankers from New York ‘ s Ship Finance Week pictured on ShippingBabes made me laugh). Interestingly, nobody is talking about maritime dotcoms anymore. Depending on WS rates, they may or may not be talking about tanker IPO’s. Ato Worldscale 40 and below on large tankers does not throw off enough extra cash to invest in dotcoms and portals. However, in the year 2001, upgrades to an electronic infrastructure are akin to changing out integral parts for more efficient equipment. Instead of a “cash for flash” investment mode, demanding an impossibly high risk adjusted venture capitalist return, the scene is now hospitable to players with a long term outlook. In this column, the theme is not businesses that want to change the rules, rather it is companies trying to combine the best of physical and virtual businesses. AShipIQ, based near Boston (USA). The conversation began with a discussion of freight derivatives, where ShipIQ intends to be a player, as the market further develops. About halfway through my conversation with Mr. Terry Hammer, the CEO, I said to myself, “…you know, these guys are doing it the right way…”. Unlike larger well publicized giants, they have an electronic platform for tanker chartering that actually works. Perhaps even more importantly, they have experienced shipping people (not “customer service reps” – with neutrally accented delivery of scripts, but ill-suited to solving chartering, vetting and operational problems ) holding the hands of present and potential clients. In fact, Mr. Hammer confided that their shop is also booking physical customer business, a waypoint towards the voyage towards a screen based business. ShipIQ has the cargo flow from Repsol, but is also booking third party business. They are also looking at the barge business, where hundred of millions of tons move in US products and chemical trades alone, many in baseline large shippers’ distributive movements programmes.

So, in this more sane market climate, the emphasis is on efficiency, sprinkled with a little collaboration and connectivity. The third “C” , content, is last year’s cocktail. With maritime information providers now in a consolidation phase, like everyone else, it is a time for a fresh swig. The folks at Bunkerworld have now begun rolling out Tankerworld, which attempts to port the winning formula, based on directories with add on customization, over to the tanker market. Did we forget the 4th “C”, for context? Context, ie what fits where?, enables shipping professionals around the world to add value . Tankerworld offers fixtures, vessel descriptions, and excellent market commentary from both Telemarine’s own stable and the Seatrends team (probably the most insightful tanker journalism on the net). Good content presented in the correct context- a winning formula. Unlike the Silicon Alley definitions of content (often supply driven and pushed at the marketplace), some web provided material actually increases in importance in the post Erika world as more ships are vetted and charterers and ports deploy better information sharing platforms. Vessel Questionnaires fit into this category, and we were pleased to see that Heidmar is rolling out a questionnaire completion and distribution business, Q88.com. Successful net based maritime business nearly always center around applications developed in house- the Q88 tools have already been used for 3 years by the Heidmar led Star Tankers pool; developing third party business is a logical next step. Several months ago, Heidmar boss Per Heidenreich talked about an increasing importance of freight derivatives in his company. In my admittedly biased view, freight derivatives will drive the commercial role of the chartering sites. ShipIQ, and others, readily see such a role, although they lament the industry’s difficulties finding acceptable indices. Financial brokerages trading currencies and interest rates provide ready models for adaptation to the net. Swap contracts, the building block of freight derivatives, require only rate and date negotiations, and financial settlements rather than cumbersome postfixture negotiations. True- the execution phase, after a booking, is where the net can add tremendous value, but derivatives, representing a separation of price risk from more knotty operational risk, are ideally suited to online trading. Even the stodgiest of brokers realize that derivatives are here to stay- a consortium of London brokers including stalwarts Galbraiths, Gibsons and Seascope- Braemar, have launched Global Freight Futures Limited with an office in the ritzy part of Picadilly, to handle tanker futures. Active players Clarksons and SSY are also in the space, but are augmenting their phoning and faxing with the net. MJLF, in the States, has been quietly enhancing its website, built up an existing postfixture platform, allied itself with electronic chartering purveyor Chinsay, and now boasts a derivatives team. A web based exchange for trading freight derivatives, Imarex.com, is set to launch later this year, after kicking off with a trading competition during August. Imarex, with the backing of a veritable Who’s Who of Norwegian shipping, aims to improve on the burgeoning OTC marketplace. Several months ago, I described the lack of clearing mechanism as the Achilles heel of the derivative markets. Imarex has plans for a central clearing mechanism, which opens up an ability for truly anonymous trading, electronic linkages to banking channels, and more. Impressive still is a roster of shipping and derivatives professionals who know the marketplace from the inside, including old friends from some of the leading Norwegian players. The derivatives market brings about its own set of information needs. Brokers’ research capabilities are meeting this void. But just as Imarex hopes to offer derivatives directly without the brokers, there is a role for an independent research site. www. Shipanalysis.com, the brainchild of Frode Aschim, a veteran of both the maritime internet and the London derivatives scene, and now back in Oslo, fills this void. Frode, whom I met over the net in 1995 and in person a few years later, is launching a site offering trend analysis for shipping rates, as embodied in the dry and tanker indices. Paper traders will all tell you “the trend is your friend” but, in reality, the big money is made, or lost, by anticipating and reacting to reversals in a trend. The excellent

presentation of the charts and graphs, designed to identify changes in the trend (with 94% accuracy, according to Frode’s introduction) was an eye catcher. What caught my attention about www.ShipForum.com is its excellent email campaign, imploring recipients to “get a life”, ie free up more time (for shmoozing clients, perhaps) because they are using tools that will bring about efficiencies. The web based ASP site is straightforward enough offering a marketplace, where dry cargo ships are matched with small cargoes and a set of tools. These include a set of integrated modules for doing calculations and then managing the post fixture whirl; importantly- these are already in action for real clients. The founders of the company bring real ship agency, commodity trading, dry cargo and S & P experience and, in conjunction with software professionals, have written the tools themselves. There is a recognition that principals and brokers will carry on the old fashioned way, while beefing up their back room execution capabilities electronically as appropriate. And finally, ShippingBabes has some competition, of sorts. Yes, anyone still reading here should check out http://www.czbrats.com/ that’s right- a site dedicated to Panama Canal culture and the “Canal Zone Brat” – a different subspecies of shipping person than the genus captured by JK- but a vibrant international part of the scene, nevertheless. I got to the brat’s site from my friend Barry Evetts’ brochure at (www.barryevetts.com). Evetts, an old shipping hand active in both Hong Kong and the Caribbean Basin, casts these venues as backdrops to the action in his thriller The Panama Affair, which his website is promoting. His book is available online, another example of the maritime internet in action. A Tale of Two Sites Summer 2001 SEATRADE Memories of last year’s internet deluge have already dulled, and the post dotcom landscape is sparser, but now coloured with web presences that have melded traditional businesses with online net based capabilities. The new visage starkly contrasts with last year’s flood of over-hyped startups, some staffed with celebrity CEOs hoping desperately to lead their troops in a sensible dialogue with high priced technologists wanting to shove square pegs into round holes. Fixing ships is the ultimate in customization, and successful online venues enable users to make the necessary adaptations. The two sites profiled here, ShipIQ and Shipforum, have worked with technology to fit existing ways of fixing vessels. The web addresses still online, survivors as it were, reflect the leadership of shipping people. The management bios on ShipIQ site reflect oil supply and trading, and tanker operation / broking, providing an early clue of a site built by industry professionals. The first class infrastructure, based on a web technology developed in house in conjunction with extensive user input, works quietly in the background on the well designed site. Meantime, across the globe in Singapore, ShipForum is gaining traction with a no-nonsense dry cargo site that brought an existing community of shipping enterprises on to the net, and picked up some new members along the way. SHIPIQ ShipIQ’s site, which I was allowed to sample, is an all business tanker chartering experience that mirrors real shipping practices. At the top of the “Enter New Cargo” screen on the commerce website, a pulldown menu prompted me to look at frequently entered cargoes, basically enabling me to post a requirement that was really a repeat of the last order, with the ability to revise the dates. This screen, where a default set of pre-populated but editable fields pops up, typifies what I found throughout ShipIQ, a set of applications designed by someone with many real fixtures under their belt. During my visit to the site, I was wearing a charterer hat, and I found that the same well thought out user-friendly mechanism to be pervasive across the site. Surrounding the fixing venue are internally generated market reports, news (from Newsedge), ship descriptions and port descriptions (from Fairplay), as well as a voyage and distance calculator (from Bergen based Dataloy). The beginnings of a post fixture capability, tracking the very cargo that has just been fixed, are now evident.

ShipIQ commenced operations late in 2000 , a year after its formation. Financial backing came from a division of Repsol, the Spanish oil giant which absorbed Argentina based YPF in the mid 1990’s. A team was assembled, led by oil industry veteran Terry Hammer, and the first clean products fixtures were concluded during the Autumn of 2000, and the first million barrel crude fixture was made through the site in the Spring of 2001. Repsol cargoes are posted on the ShipIQ site, and are also worked through brokers. Two years ago, when the net onslaught began, observers (myself included) were predicting that a new type of hybrid shipbroker would emerge, placing an electronic desk alongside a traditional physicals desk. On a recap generated following one of my ShipIQ fixtures ( a cargo of Nigerian crude into North Europe with other options), the main points were listed, followed by the extra clauses, along with various subjects that we needed to clear. From the last line in the recap, the commission line, 1.25 % to ShipIQ, it was clear that those earlier predictions of quasi electronic brokers had now come true. CEO Hammer described ShipIQ’s strength in terms of a three pronged pedestal of a platform that actually works, a strong partner, and a goal of doing third party business. In tune with the hybrid broker concept, Mr. Hammer says that he places a great deal of importance on hand holding, where shipping people (not customer service reps) stay on the phone with clients guiding them through the very intuitive sequence of screens where orders are posted, ships are listed, or offers and counteroffers are traded. Even with the human touch, the power of the technology is still very palpable; for example, multiple coloured negotiation screens show what’s been agreed (in blue) and what’s outstanding (in red). In addition to the recap, I could print out a transaction history showing what items had been agreed at what time. SHIPFORUM Half a world away, a group in Singapore, the brainchild of a shipbroker and a pair of raw materials traders, have used different tools to attack the same problems, albeit for the dry cargo business rather than the tanker business. The Shipforum team, which joined forces with what was “ShippingDesk.com”, have taken a different slant on the hybrid broker idea, potentially enabling co-brokers to use their system- most likely posting cargoes, or vessels, for their principals. Shipforum’s business is very much in the ASP (Application Service Provider) mode, and they see themselves as tools providers to a marketplace of members, who must be vetted to join the community. The exchange functions, with tools for listing ships, listing cargoes, matching tonnage against requirements, and negotiating deals, are complemented by the ShippingDesk community features, including alerts and secure correspondence tied to a particular negotiation. There is a database of ship descriptions, also from Fairplay and a member’s directory, as well as portal features, including private web pages and ad hoc networks built around particular fixtures. The site’s emphasis on community, and the use of the word “portal” (all but gone from the maritime internet) struck me, initially, as being “…so 1998 or 1999…”, as they say in Internet parlance, where technologies and web page schema are terminally trendy, in vogue for maybe six months. However, my first impression was incorrect. Unlike a Silicon Alley artist’s version of a shipping site heavy on form and light on function , the present venue was developed and used by charterers fixing real cargo over several years. The list of open positions, including Panamax and

Handymax vessels all over the world (contrast with 2000 ton coasters littering some bulletin board sites) reflects the mainstream, not the periphery of dry cargo. Like ShipIQ, this management has learned that square pegs are indeed unsuitable for round holes. THE FUTURE Electronic chartering is now part of the scene. Additional sites are coming on line during the second half of 2001. Principals and brokers must now monitor multiple systems to see the entire marketplace. ShipIQ and ShipForum are both closed communities, islands in a large stream. It is unlikely that one marketplace will dominate, and soon the multiple freighting venues will need begin promulgating common elements that will help all of them. On the procurement side, the sites have cooperated on an XML language that will enable common parts descriptions to be fed into all of them. Will ship descriptions or chartering terms benefit from similar initiatives? The newly formed Marine Electronic Commerce Association (MECA) is already exploring such standards and its membership overlaps with that of some important trade associations. Perhaps the islands will be linked before too long. E- Shipping and E- Logistics article SEATRADE APRIL 2001 The Internet has created new information businesses to serve maritime interests, and the transportation industry generally. The voyage has been far from smooth. This past year’s stock market correction has clearly separated the online businesses that will add value from those that don’t. The first group, many with highly regarded customers now in place, has been able to raise additional money to fund development, while the second group has sputtered and sometimes been forced to turn off the servers. This will be an exciting year for the bulk shipping business, the parcel or liner sectors, or from supply chains that touch on these modes, as ideas evolve into software products and trading exchanges that will dramatically impact the flow of goods and materials on vessels in local, regional, and international trades. The information consortia, such as Inttra ( http://www.inttra.com ) or GTN (http://www.tradiant.com/cgi-perl/press_releases.cgi?releaseID=12 ) , are now remapping the contours of the entire liner business. Membership in an information portal may begin to drive the actual carrier alliances and eventually, mergers of companies in a consolidating industry. Financial pundits suggest that we may be at the precipice of an economic recession, as foreshadowed by plunging equity indexes. Against a recessionary backdrop, as big businesses re-allocate spending, high potential returns are seen for both supply chain efficiencies and for enhanced supply chain collaboration, with payoffs, respectively, from reduced costs and increased revenues.The monies spent on logistics are huge, in the $Trillions throughout the world, while the present penetration of e-logistics software is small. Taken together, that spells opportunity for well developed information solutions, and for investors. For e-Logistics companies serving the shipping industry, revenue streams are possible. These include ASP (Application Service Provider, ie pay by variable usage), Transaction based (ie a commission usually some percentage of the transaction value), and subscription. Revenues may also include implementation (actually putting an information system in, and integrating with the existing system), consulting / training (advice and instruction), as well as recurring maintenance fees. Expert thinking on Business to Business, as embodied by Boston (USA) based AMR Research ( http://www.amrresearch.com ) , suggests that both large and medium sized companies will increasingly work to achieve these twin objectives, more income and reduced expense, through something called a “Private Trading Exchange” (PTX). The PTX is a hybrid between the big E-Marketplaces, and the company extranet. As shippers adopt PTX’s and similar interfaces to the outside world, carriers and other service providers, desiring to maintain or even enhance their visibility with the cargo interests, will be forced to jump aboard. The carrier initiatives chronicled in

Seatrade Review over the past few months suggests the carriers and intermediaries are already responding to these trends. The marketplace is still being sorted out- over the past year, some winners (perhaps defined as “survivors”) are emerging. Just as intermodal cargo has, by definition, linked disparate modes together, information about shipments is no longer purely “maritime”, “rail”, or “road”. The modal blurring is mirrored by a blurring with respect to functionality, companies position themselves as combinations of marketplaces, supply chain or warehouse managers, content (usually trade and customs regulations) providers, optimizers, or even specialists in tracking and tracing shipments. The company discussions that follow will reveal many overlapping capabilities, as turf is being claimed in the burgeoning logistics arena. Some of the big guerillas, in the transport space, established pre – Internet with a following among investors, include Logistics.com (http://www.logistics.com ) , known to some through its purchase last year of Quoteship.com, and Descartes (http://www.descartes.com/ ) known to Liner denizens through its acquisition of E-Transport (the former Transax), a leading publisher of U.S. liner tariffs. Logistics.com offers a combination of bidding engines, that generate and transmit shipper RFPs on space to selected carriers, and a suite of products to enable the carriers to optimize and perform yield management functions. Descartes offers “collaborative logistics management”, a theme which underpins many offerings, and sells based on packages customized for particular industries. Both include software to manage liner shipment execution and plan shipment programmes. Many of the present contenders are new e-businesses have been founded by industry veterans in tandem with technologists. Consider GoCargo ( http://www.gocargo.com) , which started with a marketplace where with a reverse auction format, where shippers post their container-loads and carriers then post competing offers to transport this freight. To aid shippers in moving shipments, a partnership has been inked with Vastera ( a content provider with its site at http://www.vastera.com ). As it has gained members, it has augmented the transaction capability with other tools, for example its NaviPact- an aid to administering complex service contracts. As GoCargo moves beyond the transaction realm, a new set of competitors emerge. For example, Tradiant ( http://www.tradiant.com ), tied to the GTN Consortium, certainly has booking functions, augmented by tracking and tracing and a suite for managing service contracts. An important business activity of successful companies like Global Logistics Technology ( http://www.g-log.com )-with a product called the “Global Command and Control Centre” or Celarix ( http://www.celarix.com ) , is to provide “visibility” - really linking information systems throughout a company and to tie into business partners’ systems. The internet offers new opportunities for aggregation business, as evidenced, for example, by G-Log’s strategy of putting its systems into online marketplaces, where multiple buyers and sellers, ergo shippers, are transacting deals. However, the visibility aspects are tied to other functionality, for example Celarix has allied with NextLinx (http://www.nextlinx.com) , another provider of trade information, while G-Log has teamed with Vastera and others offering similar content. Information providers vying for a share of this space, also include http://www.from2.com , http://www.Mycustoms.com, http://www.Xporta.com and http://www.clearcross.com . These businesses take the notion of “content provider” way beyond the news stories or ship descriptions found on maritime business sites. Many Seatrade readers will be familiar with FreightDesk (http://www.freightdesk.com) , spearheaded by industry personality Rob Quartel. FreightDesk, and lesser known entrants such as 3Plex.com ( http://www.3plex.com ) , are aimed squarely at the intermediaries, generally freight forwarders and customs brokers dealing with export and import shipments, respectively. The business models of such companies go way beyond just transactions; FreightDesk licenses its technology into customers, as well as providing services to intermediaries as an application

service provider (where revenue is tied to each usage of applications, typically hosted on the website), with emphasis on complicated calculations, regulatory submittals, and routine paperwork. FreightDesk has singed deals with a number of intermediaries; more interestingly, it has signed up at least one Shipper Association, aggregating cargo of numerous shippers. The e-Commerce activity has been concentrated in the Liner segment, rather than the bulk side, because of highly complex supply chains, automation in other modes and in port systems, along with higher value goods. The bulk industry has seen fierce grappling by dozens of startups. Optimum Logistics, http://www.optimumlogistics.com , a management system that is, in fact, an outgrowth of homegrown capabilities in the Stolt organization, has now secured some third party business, with a concentration in the chemical business. Optimum stresses that value is added through reduced variability in the supply chain, which translates into the measurable benefit of lower inventories on hand. Another effort gaining considerable traction is LevelSeas.com (http://www.levelseas.com ), a newly formed consortium of nearly 30 industrial shippers, shipowners and brokers. Though still in a beta phase, the plan is to offer capabilities that will touch the chartering (fixing) process, as well as the all important post-fixture portion of bulk shipping voyages. Both players stress capabilities to show one big supply chain and selectively move information contextually into/ out of the appropriate link in the chain. There are some big questions surrounding e-Logistics, whether in the bulk or liner portions of maritime trade. In headier days, some of the companies were claiming that they could provide one stop shopping for large multi-national enterprises moving goods, but now, such claims have faded. ING – Barings suggests in its March 2001 e-Logistics Overview that “…large and medium sized corporations are better served by seeking their transportation and logistics solutions from several sources…including providers…who specialize in their respective areas.” This approach, combined with skillful integration of various portals- such as those offered by carrier consortia, databases and shipment information streams, is the future face of transportation logistics. March 2001 CMA Report This year’s Connecticut Maritime Conference (CMA) lacked last year’s dotcom mania, but instead featured the beginnings of what will be a long war. Sitting in the audience at this years’ seminar, the shots heard ‘round the world were fired. That’s right, a polite verbal skirmish erupted between LevelSeas and the Baltic Exchange, both of whom had speakers presenting. Basically, the contested turf is the broker’s patch- are the brokers part of the ill-defined inefficiencies that online marketplaces hope to wring out? The Americans, long counted out of the shipping industry, have re-invented themselves with a new role- providing a venue for the London boys to duke it out. Every industry conference reminds me of the importance surrounding the “community” aspect of our business. The consultants’ business process analysis, revealing “inefficiencies” (that are then cited in Powerpoint presentations at conferences) gloss over the important lube oil that intermediaries bring to a marketplace. Can “community” follow the transition to the web, can online communities SUBSTITUTE credit guarantors for the trust that comes from knowing everyone on the trading floor? Or, do marketplaces bring in credit guarantors to EXTEND the reach of a human marketplace, as OceanConnect and Smartbunkers, both of whom had booths at the CMA expo, have done? These are questions that we are all pondering. During the question and answer session, it became apparent that the Baltic Exchange has a good handle on “member

to member” matters, with respect to a mainly London-centric venue. A concern clearly emerging, however, was that non-members’ words lack tight bonds embodied among member to member trades. Credit enhancements, effectively allowing an extended community, will add substantial value. We were recently amused to see that one online marketplace, Cargobiz.com, unfortunately not at the CMA Conference, but touring the States a few weeks prior, has announced that it will be starting an online “Circle of Friends”, hoping to bring members of the shipping business together. This is laudable, but worth a chuckle because of an eerie resemblance to the “Company of Friends” brought to us by my favorite mag, Fast Company. In all seriousness, the idea is good but must be handled sensibly. The shipping industry already has numerous circles of friends who move seamlessly from New York to London to Oslo to Greece, and on to Hong Kong and back again to the States. Indeed, the ShippingBabes booth, with its foosball table (a holdover from the New Economy), proved to be a magnet for the heated discussions of shipping people from U.S., U.K., Greece, and Norway. Every year, this conference, and others around the world, provides the glue and community we all crave, as online and offline happily complement each other. It was a busy week- thirty miles south of Connecticut, in midtown Manhattan, financiers ING Barings hosted a transportation/ logistics investment conference, where speakers from at least four transport modes re-affirmed our contention that online transport activities should be grounded in the physical world. Parenthetically, a handful of leading listed tanker companies were speaking- and e commerce came up only in the context of a tracking system for barges and tows in the U.S. inland river system. On the maritime internet, the winning media formula has been a combination of online presence and physical conferences. In my opinion, Cargobiz- with a good site and business model, should concentrate on shinc and shex, and let the community coalesce around the business end of the site, ie the ships and cargoes listed by its impressive member list. If my buddies in Hamburg ignore my advice, and insist on following the Fast Company prescription for online community, I would hope to be invited to any offline beer blasts which invariably buttress the online community. As a practical matter, the community component of business sites is often the “user group”, with coffee served afterward, which would also be worth attending. When in Germany, I will also take the time to visit Glomap (http://www.glomap.de) , with roots in the physical marketplace now making a smooth transition to the online containership realm. In a well thought out strategy, Glomap has also allied itself with a marketplace for connecting container ports with the hinterland. Their circle of friends is conducted via an old tool, the telephone. After the CMA speeches, the debating moved out into the hallway to JK’s foosball table, adjacent to the main meeting room, where some animated discussions of company valuations took place. One participant queried how LevelSeas could be valued at $100 Million, if the aggregate annual revenues of Strategic (an exhibitor) and Dataworks (not an exhibitor) were far less. I pointed out that recurring revenues bring about higher valuations, just because of their predictable nature over multiple years. I also tried to explain that “hidden revenues”, ie money streams not even contemplated now, will be put through online marketplaces as out of the box thinking gives rise to new products. My sparring partner gave me a blank look when I explained the inverse relationship between the lower discount rate and the higher company valuation , so I switched back to foosball. Joining us around the table was one fellow from www.demobeach.com, an exhibitor that is offering an innovative approach to facilitating some of the most horrendous negotiations in the entire business, scrapping transactions (primarily on the Indian subcontinent). While not necessarily the most elegant tech solution, such a site adds considerable value by cutting through a horrible business process. The online world is opening up vast new vistas for forward freight and bunker products. At the CMA social events, I had a chance to chat with outgoing Commodore Per Heidenreich, who confirms that his company is actively managing the income side of its finances with freight derivatives. The incoming Commodore, Mr. Marc Saverys, has also lent considerable liquidity to these marketplaces over the years. The Belgian outfits tied to Mr. Saverys have been active

users of Biffex futures in the 1980’s, and, more recently, forward freight agreements. Both of these organizations will no doubt increasingly use their web sites as windows on the freight derivatives (and also energy derivatives). Many sites that talk about “futures” should be careful of nomenclature- regulated exchanges trade futures, where a clearing mechanism guarantees performance. In contrast, the shipping industry trades “forward” instruments, including FFA’s over the counter. Credit, and the ability of the other party to perform, plays a key role in such marketplaces, as the concept of community is expanded over multiple Continents. The Baltic Exchange, which persists in trying to interest a London commodity exchange in clearing futures contracts on individual routes, should change its tack and, instead, bring in outside credit guarantors. As suggested by Jean Richards, from Fairwind Shipping, the Baltic should follow the lead of OceanConnect and SmartBunkers in this regard, to reflect this new age (NOT new economy!!!) notion of community. Sites like Demobeach will also need to look closely at the credit issues, as they have done with inspection issues. The internet will infuse itself into bulk shipping through forward freight marketplaces, and this will happen without futures exchanges. Big commodity exchanges have absolutely zero interest in maritime freight, or bunker contracts. Likewise, the shipping industry has little tolerance for highly standardized contracts and for regulatory scrutiny. Besides, credit clearing over the net is a much cleaner mechanism for guaranteeing paper performance. Let the regulated exchanges trade futures contracts aimed at broader markets and let maritime brokers add value through the ability to customize forward contracts. Under any scenario, the Baltic Exchange must become more aggressive about licensing its indices to all comers, a well trodden path in the intellectual property world. The value of the indices is recognized, and I would support, and help the Baltic lobby for, such a licensing scheme. EnronOnline, already making a market in some of the routes for big ships, is leading this charge, along with SSY and Clarksons (both of whom are online). Around the cocktail parties, there were discussions of a Norwegian online effort where Baltic tanker index routes will be traded over the internet. Some of the “hidden value” for maritime dotcoms referred to earlier will come from derivative and paper transactions and the infrastructure needed to support them. Meantime, others such as Heidmar, are using their websites, as windows onto the derivatives markets. What we are seeing in the maritime space fits neatly into the largest business context. At the ING Barings Conference, the keynote speaker, from AMR Research, suggested that Private Trading Exchanges, somewhere in between extranets and online B2B marketplaces, would provide the corporate face on the market for many transactions. Sadly, the bulk shipping guys had all left by the time that AMR and then Tradiant (the platform behind the G T Nexus, recently re-named) spoke. This is too bad also, because, in some ways, the liner marketplaces are taking a cue from their bulk cousins. GoCargo is presenting Navipact, a tool for managing liner service contracts. Shipbrokers and some of the listed companies presenting at the ING conference have been managing contracts of affreightment for years, but their liner brethren are left to reinvent that wheel. DIGITAL SHIP INTRO ISSUE Fall, 2000 As The Digital Ship was being launched, oil shipments were reduced, but quality vessel supply was reduced further. The result was that tanker owners’ daily revenues soared to levels not seen since the last Millenium- on internet time or any time. But with this rate spike, unlike others in the past, my market view was greatly enhanced. Just to assuage any doubt about the market’s strength, I logged on to the Java-based calculator on www.platou.com and instantly calculated that the latest fixture, at WS 110 on a big barometer VLCC was worth $ 51,178 per day. Of course, the well done market reports of MJLF (not yet a dot com, but deliberating for hours in the partners’ lunchroom high atop Clearwater House about whether they should buy

“Demurrage.com” from its owner) said that WS 110 equated to $55,810 per day. My other window on the tanker market, Johnny Kulukundis at CR Weber, said that it equated to “…big bucks, Barry...” Johnny, being very excited about the high market, did not compute the TC rates out to the last dollar. The discrepancy between Platou’s online calculator, and the result of MJLF’s Excel calculator, can be attributed to different assumptions on the vessel lift, 270,000 tons and 280,000 tons respectively. Could the intermediaries actually make inroads, with the internet? Suddenly, while charterers were fighting over choice tonnage, with triple digit Worldscale rates for tankers, we now we had dueling market reports. The quality of these reports was vastly better quality than those old news stories where we learned that, “….the market will go up unless it goes down…”. With the web, shipbrokers were suddenly building their brands, and, hopefully acquiring customers by offering new ways to display and manipulate the same old fixture information. Yet this ability to present the mundane (sorry Johnny) in a slightly different light was showing how the brokers could customize information, and deliver it over the web. If the brokers could then deliver to savvy oil traders via their websites, they would be doing the branding and direct selling all from one screen. Instead of spewing out more of the same data, brokers could actually be delivering information that their customers needed. Who is really leading the charge? By any measure, rates north of $50,000 per day represent great times for owners. Has their good fortune led to clamoring for internet based chartering processes? Absolutely not! Instead, the cargo side of the market, and, a few very forward thinking brokers, have been leading the charge. In the middle of a private consultation regarding the various web based brokerage infomediaries, a top oil company shipping veteran interrupted my speech, took me aside and whispered to me, “Barry, think about chartering as it can be, stop telling me about how it is now.” This gentleman, whose freight bill has more than doubled versus last year, was justifiably eager to see into the future. This year has belonged to the owners- due mainly to supply side pressure. The big cargo boys, perhaps incorrectly attributing the strong tanker market with the launch of some high profile pools, have been anxiously looking for a way to claw their throne back. All the shipbrokers know that cargo is king (well, maybe not this year, but most of the time). Those brokers who have not been digging that canal between the old way and the net way, have been in complete denial. Since nobody (including your strongly opinionated writer) knows exactly how the web will impact the world of ship chartering and operations, there are as many opinions as there are business models. At one extreme, those touting the hub model, where many users come to one venue, suggest that all fixing activity will move to a central exchange. On the other side of the spectrum, the “many to many” model is alive and well, led by windows based software developers, and encouraged by their customers, who have asked them to add an internet feature on top of the “send telex” button. And then, some fringe groups are thinking in terms of patents on intellectual property, which implies a view of one solution for a big market. How the words “tanker chartering” and “intellectual” can occupy space in the same sentence is beyond me, but now at least two shipping web businesses are attempting to gain patent protection on their processes. No doubt, more will follow. But back to my oil company mentor, of sorts. His utmost concern was not eliminating intermediaries. In fact, he said that he would encourage the brokers to join some of the sites and maybe some of the technology would rub off, leading to a more efficient process. Going back through history, technology has actually enhanced the role of middlemen, rather than disintermediated them. Yes, just because principals can deal directly, it does not mean that they will. Consider that sailing ship captains were actually principals in merchant companies. Once the telegraph and cable network developed, agents and brokers were actually enabled, allowing the supply chains to better handle business at out-ports. In shipping centers all over the world, shipping people have happily moved out to suburban areas. And now, telescoping ahead to the present, at least one oil charterer site offers a standard Letter of Indemnity (a document that allows cargo to be transferred in the event that original bills of lading have not arrived) to be

downloaded. And then, as electronic bills of lading gain acceptance, perhaps even that downloadable LOI will seem quaint. As service providers to oil companies (or other large international charterers) adapt to these networks, they will thrive, and stay in the game. On the Internet, things are not always what the PR flacks want you to believe. The hub models in our business are often the better financed entities with bigger marketing budgets. In a business where everyone likes to talk to everyone else, and now has a new set of technologites to do so, it remains unclear to me what the advantages of centralization are. A fragmented industry that has resisted centralization now has a new arsenal of weapons to fight with. For those middlemen, there are more ways than ever to add value, and the principals welcome it. Just ask my friends at Platou, MJLF, and CR Weber, who have recognized this, and are embracing the internet.