Internet ship-brokerage Levelseas went live this week, saying it would add functionality to allow cargo-owners and shipowners to trade with each other directly before October. "This initial release of LSX is LevelSeas' first step towards building a global, web enabled freight exchange and voyage management system," said CEO Richard Hext
. Hext said that cargo owners and ship owners already did "a hell of a lot" of business directly without the use of a broker, and it was too early to know whether this would increase.
"They will make the decision as to whether they'll do more direct, or do more through brokers, or whether they'll work with the smarter brokers who are on the system," he said. He said the functions the brokers performed would change over time and migrate towards more consultancy, but it was unlikely they would be cut out of the equation.
LevelSeas (www.levelseas.com) was founded by Shell, BP (BP)
, Cargill and London shipbroker Clarksons in April 2000 to broker ships for cargoes over the Internet. Of LevelSeas' 33 backers, Clarksons and Oslo-based RS Platou, are the only brokers.
Hext said LevelSeas revenue would come from a mixture of subscription fees and a transaction fee of around 0.50 percent. The board agreed a pricing framework on Tuesday. "Most brokers (who choose to use the LevelSeas system
) have said they'd prefer a flat subscription fee and not to pay transaction fees, so that's the approach that we're going to take to the broking community," said Hext. Ship owners and cargo owners would choose their own method of paying.
Traditionally, brokers have charged 1.25 percent commission on any freight deal they handle. But even when ship owners and cargo owners deal direct, brokers are often still paid regardless.
Though LevelSeas has never publicly stated how much has been invested in the site, industry sources put the figure at close to $40 million. Hext said that the site would break even sometime in 2002.
Alex Gray, head of e-business at Clarksons, which is one of two shipbrokers with a stake in the site, also said it was too early to sound the death knell of the traditional broker but the role of the broker would change. "Even the best technology is still not as good as the worst broker," he said. - (Reuters)