Is shipping becoming more "science" and less "art"? Intuitively, access to better information allows for a more scientific and less of a "seat of the pants" approach to chartering and S&P. Conceptually, I think it is useful to think of shipping data in terms of layers of information. The first layer can be termed the 'geospatial' layer and comprises what is now pretty standard tracking of ships and an estimate of the type and volume of cargo onboard. It's the relatively "easy" bit - yet still quite hard to do as, on average, the actual location of any given ship may only be seen 70 - 80% of the time given lapses in coverage. The second layer can be termed the 'commercial' layer and comprises information on the commercial status of a ship - for instance whether she is fixed at a point in time, details on the disponent owner/charterer, and rates etc. This is possible to keep decent track of in some segments (e.g. VLCCs) but such information is generally kept fiercely private and most segments remain opaque. Frustratingly for data scientists, there is no clear-cut connection between ship movements and, say, the commercial (fixed/open) status of a vessel and so the link between the two layers is probabilistic at best. The third layer is human behaviour - effectively how people act on the public and private information available to them. Just referring to this as "sentiment" is probably too narrow - it has more to do with game-theory and tactical decision making. For instance, Greek-Cypriot maritime economist and MIT professor Zenon Zannetos in the 1950s coined the term 'intertemporal substitution' as one of the key drivers in the tanker spot markets. He observed that since both charterers and owners have some leeway in terms of when to fix, the effective number of ships and cargoes in the market in the very short run can fluctuate wildly even in the absence of any fundamental change. If the market expects higher rates, charterers will rush to the market and owners hold back, leading to an improvement in the supply/demand balance and higher rates - a self-fulfilling prophecy if you wish - and vice versa on the downside. This results in the typical short, sharp cycles seen so often, for large tankers in particular. The complex interactions of these three layers, combined with unobservable variations in data coverage ("are fixtures actually up this week, or just the publicly released fixtures?"), keeps data-driven analysis hard and professional life interesting. And, I dare say, shipping analysis is still an art form where keeping an eye on the forest beats watching the trees...
Adds 'intertemporal substitution' to skills list on LinkedIn profile...
Should we look forward to AI routed autonomous vessels stopping at ports staffed by robots, owed by private equity funds and insured by algorithm.
If you have a gut feeling, take it as a hypothesis and then using data and conversations rigorously and dispassionately attempt to prove or disprove it. Try and work out why you have that gut feeling remembering that sentiment is an extremely important factor in the market but ultimately unquantifiable. Then make your decision and live with the consequences trying hard not to blame others if it turns out badly or think that you’re a superhero if it works out well. No one can control the markets.
Hi Roar. There are two sides to any trade: the supplier and the charterer. Not sure which side are you describing in your post. The side of the charterer (aka buyer) begins with some science. Tools supporting the buyer side obviously look for for suitable ship's availability , but the offer is always supplied as the opening gambit. The negotiation ensues, if the seller is keen. To me, that's art, but some science (geolocation, distance to Origin port, bunkering, rate offer optimization). The seller side is very different, yet some tools use science (mostly predictive analytics) to provide the seller with the information whether it is worthwhile for them to enter the deal. So, to answer your opening gambit: "is shipping becoming less art and more science" one would need to answer "yes, there is more science, but majority of the deals are still done as "art"
Maritime transport management is a combination of both art and science. While it involves technical and quantifiable aspects such as route planning, cargo optimization, and cost calculation, it also requires intuition, adaptability, and interpersonal skills to deal with unforeseeable factors like weather conditions, changing regulations, and relationships with involved parties. A deep understanding of maritime operations and informed decision-making is crucial, but the ability to creatively and effectively address complex and dynamic situations is equally essential. Therefore, maritime transport management can be considered a discipline that blends scientific and artistic elements to achieve a successful balance between efficiency and adaptability in a changing maritime environment.
Finding quantifiable proxies for market sentiment is the thing I have found the most intriguing during my days of building vessel market models. E.g. the correlation you find between dayrates of offshore rigs/ support vessels and fleet utilisation, and the correlation you get when you add (a moving average of) oil price to the equation. Two entirely different worlds... Or the correlation you get in some other sectors when you use things like directional difference in YoY GDP growth. Oh, the beauty of shipping economics...
I would still go with “ shipping is art “ theory …. True that more and more chartererer / owners are taking decisions based on the “science “ like trackers / research reports . But the human factor is still the art that runs the shipping industry . Give as much data / science to an owner / charterer / broker , he would still end up making decision on his gut feeling
Roar Adland (Ph.D., FICS) Thanks for introducing the Game Theoretic element in shipping negotiation into a conversation. My humble opinion is that most of us hugely underrate the benefits of formal awareness of game theory as a tool in negotiation . Game theory along with Information Economics ( Theory of Incentives ) goes a long way in enriching the context of any deal-making by empowering parties to appreciate the subtle dance of incentives , absence or presence of information on part of the deal-makers and second, third .... Nth order effects of negotiations. Look forward to your posts on these inherently nuanced topics.
Shipfix | Investor | Support to Creatives
1 年Very insightful Roar Adland (Ph.D., FICS). It is nuanced and relatable for other physical trading markets as well. I suppose it's fair to assume that whilst the ability to extract and map pre and post-fixture data points continues to increase over time, the "human behaviour" layer won't become a lower-weighted factor in a shipping/trading decision-making process: better information doesn't make fixing more of a science, but It allows shipping professionals to support or challenge their own experienced and professional views on the market (e.g: the development of Satellite AIS tracking allowed anyone in the market to assess if a vessel is likely to make its advertised position or not). At the end of the day, data has not yet surpassed human trust in what is still fundamentally a relationship-driven industry.