London-based ship manager Newport Shipping has introduced a new revenue sharing agreement (RSA) concept to the Handysize bulk carrier sector and will now market the scheme under Newport Handy Bulkcarriers.
The RSA concept, proven in the larger Supramax, Panamax and Kamsarmax bulk trades, has been introduced to satisfy a growing need for consolidation in what is an extremely fragmented Handysize market.
Speaking at a press event marking the scheme’s official introduction, Newport Shipping Chairman and CEO Harald Lone said: “We aim to build up a fleet of Handysize vessels which, through our operational expertise, will deliver greater freight yields to the participants.
“Traditional shipping pools are viewed by many shipowners as bureaucratic and inflexible, especially with regards to fees. For instance, pool management companies normally charge a flat daily fee plus the traditional 1.25% commission on freight regardless of the freight market level. But these fees are not performance-based and the 1.25% commission is, in reality, a fee on bunkers and OPEX; it is not related to any added value from the pool managers.
“We aim to change this by introducing a new remuneration model to the pool concept that better serves the interests of the shipowner. When the shipowner earns money, shipmanagers usually share in this. But if we are can’t beat the Baltic Handy Index, then we shouldn’t be remunerated. Our model can beat the index, creating a win-win situation. The RSA participants earn more, and we as shipmanagers are rewarded for creating added value.”
Currently, there are about 3000 Handysize bulk carriers in the global fleet and these are owned by more than 700 different entities.
“It is a very fragmented ownership structure, and with current market conditions as they are, it is time for shipowners to consolidate, collaborate and cooperate commercially,” said Lone
Newport Handy Bulkcarriers is expected to build up trading volume by fixing in Contracts of Affreightment (COA) in order to take out freight rate volatility. With its revenue sharing agreement, the Newport Shipping Group is offering tonnage providers an alternative to fixing their ships to operators on an index basis, or tramping the ships in a weak spot market.
“Most shipowners in this segment operate small fleets of say one, two or three vessels but what we want to do is put these shipowners together so they benefit commercially from the greater volume created,” said Lone.
“It will reduce the ballast leg through optimal scheduling, fix in COAs and offer freight by building up customer relations with trading and mining companies. It will give pool participants a competitive edge and increase the earnings potential for those vessels joining the RSA scheme,” added Lone.
Newport Shipping’s freight trading and operations teams in Oslo, London and Singapore, together with a central administration working as a single cohesive entity, will negotiate all fixtures either as COAs, time charter or voyage charters. The revenues are then consolidated and distributed in regular intervals to the RSA participants.