27-01-2017

BHP launches online freight platform to sink shipping costs

BHPBilliton

BHP Billiton has launched an online system under which shippers compete to offer the best price to haul cargoes of commodities such as iron ore and copper to the mining giant’s customers.

BHP this week allocated its first cargo using the auction-style platform, which it hopes will save money as it bypasses brokers who traditionally help negotiate vessel-hire rates between cargo owners and shippers.

The company plans to gradually ramp up the platform, which it said was the first of its kind for a major charterer, although it follows in the wake of similar freight portals from companies including Ocean Freight Exchange.

Such platforms could potentially overhaul the way miners contract freight services, reducing their costs at a time when commodity markets appear to be picking up following years of low prices.

“It’s the first of its kind, certainly for a charterer of our rank,” Rashpal Bahtti, BHP Billiton Freight vice president, told Reuters before the first auction on Wednesday.

BHP asked 13 ship owners and operators to submit offers through its online platform to transport 170,000 tonnes of iron ore from west Australia to China next month.

They included Japanese firms NYK Bulk and Mitsui OSK Lines, Greek owner Anangel Maritime Services and commodity trader Cargill, Bahtti said.

More than 50 bids were submitted in an hour and the final agreed price was almost $0.30 below the spot price, said company spokeswoman Angela Perera, without identifying the winning company. The spot freight index rate from Western Australia to China closed at $5.19 per tonne on Wednesday.

BHP said five vessel owners that were not invited to bid in Wednesday’s auction have asked to take part in a second auction next week.

“We will extend (the auction system) to a certain percentage of our (freight) book,” Bahtti said, without giving specific details or a timeframe.

“(As) with any new technology, we want to ensure it works and works well,” he added.

The world’s biggest miner has said it spent $764 million shipping 275 million tonnes of iron ore from Western Australia to global markets, mainly China, in the year to June 30.

But such platforms could be a blow to the ship broking industry, said a dry cargo broker at French company Barry Rogliano Salles.

“If BHP finds it workable, maybe Rio Tinto and FMG (Fortescue Metals Group) would do online auctions as well which will affect almost all brokers in the market,” said the broker, who declined to be identified.

“I do not see any big downside for shipowners. Only brokers will lose out big time,” added a senior executive at a European shipping company.

Source: Reuters

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