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AI in Chartering, An Imagined Future

AI in Chartering, An Imagined Future

What we think is going to happen in the industry based on where the technology is headed.

author Nick Clarke

Nick Clarke


Published on 25th Jan 2024

5 minutes read

I am not the right person to write this article. I do not know enough about Chartering and Commercial Operations.

Many other people have already written a great deal on the introduction of Generative AI in the Chartering space. The problem is that they are not sharing. Generative AI is the battle plan for most companies heading into 2024 that most people know nothing about.

It is hidden in the White papers, Executive Memos and Proof of Concept papers that are being written by the Innovation Teams of the largest players in the industry, by some small and medium-sized players who have already differentiated themselves based on using digitisation and, by extension... Generative AI as a competitive advantage.

We know this because we’ve engaged with many companies either on the journey themselves or looking for the right bearing.

So I suggest that the reader and I write this article together. I can lay out clear principles of how GenAI will operate in the future, I’ll make some suggestions and inferences based on my limited knowledge. Then, you will have to consider them and apply and discard them as you wish to your knowledge of how Chartering works.

Triage: Prioritising Life

One of the clearest values of GenAI is its ability to ingest, assess and decide on data. Its ability to navigate multiple channels of communication and to hold them all in mind when making decisions is one of its greatest strengths.

What this could look like is an Agent that triages your vessel's incoming cargo prospects. It can apply reasoning and consider which cargoes might be viable for the vessels you are managing.

In the future, an Agent will triage all prospects for you. It will narrow down thousands of prospects to just a handful. It will have a recommendation.

Automating; Not Automation

Let's say that out of the handful of viable offers and the thousands of spot cargoes that came in, you’re now in a position where you want to consider putting together a freight rate.

If you are working out of Singapore, several of these offers came in after hours. After triaging the best candidates, the AI knows you will want to put together a freight rate to send to the broker.

Either the AI pulls the latest Port Costs from recent transactions, or if it does not have the data, it uses its automated communication ability. The AI contacts port agents for port, loading and discharge costs and loading rates.

The AI reviews previous freight rates for similar cargoes, ports of loading and discharge and the same counterparty. Using this data, in combination with the latest market data on rates, suggests an estimate of how to price the freight.

It adds in any commission due to the Broker.

And it comes up with a freight rate.

Looking at the expected voyage, the AI considers the likely Daily and Aggregate TCE rate and the impact of Initial and Actual TCE rates on the final figure.

By the time you get to work in the morning, you have several Charter Opportunities to consider, each with an estimated freight rate and TCE Earnings, including upper and lower bounds on likely outcomes.

Will AI Automate a Chartering Manager's Job?

It depends on the Chartering Manager.

If you are a Chartering Manager… what is your role? What clients tell us is that the average Chartering Manager may perceive this as a threat. They’ll have a sense that their static book of business might have the potential to be largely automated. After all, they are just running the process of Chartering for what is, in fact, long-term, static, relationships, where if the price is right, the relationship ensures the deal will move ahead.

Where our clients believe that GenAI will have the biggest impact is with their Star brokers. The 20% that are bringing in 80% of the revenue. The way they see it, if you can automate all of the essential but primarily administrative tasks that these Brokers are working on, their capacity to build relationships and bring in more business will continue to increase. The value of what they deliver will expand.

If someone is responsible for chartering out 5 vessels today, they could be chartering out 15 in the future with a similar workload.

If someone is chartering out 20 vessels today, it could be 60 in the future.

This could lead to the rise of individual Chartering Managers, who carry a book of business so large that it is possible to sustain an entire mid-sized to large commercial operator.

Data, to share or not to share.

Data, the ultimate competitive advantage. The larger the company the larger the perceived moat of dominance they can apply to the rest of the industry.

Data-led organisations can gain greater insight into what will happen in the future. With AI, they’ll not only be able to infer but also predict. So why would you share your data?

At the moment, you probably wouldn’t. You’d keep that advantage in-house. Sell that concept to customers and investors as being your USP, the secret sauce that enables you to outmanoeuvre the competition, and why wouldn’t you?

What we have seen in crewing is that the smaller the company, the greater their willingness to collaborate. We will see the same in the rest of the market. Smaller operators, with a smaller data advantage will share their data with others in an open ecosystem. Initially, it may be dismissed as unimportant by the remainder of the industry, but as their collaboration grows, they will reach a level of dominance, and the data advantage of larger operators will diminish hugely.

Once the industry hits that tipping point, most likely, all data will be shared by all operators because not sharing the data has become a competitive disadvantage. The 49% who don't share data will not be able to outcompete the 51% who do.

And I think that is an important point about AI. Initially it will favour larger players, but over time the advantage it delivers will push markets towards flatter competition which favours all, equally.

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