Online Bulk Shipping Exchange Will Transform Market

An online shipping exchange being set up by two of the world's biggest oil firms, a leading agrifood multinational and top shipbroker will transform the way traditional shipping markets work, industry experts said.

The company, LevelSeas.Com, being set up by oil majors BP Amoco and Shell International Trading and Shipping with food processor and distributor Cargill and shipbroker Clarksons will potentially control 10 percent of bulk commodity movements from day one.

But it aims to be a neutral platform open to all sides of the industry. "This will act as a real catalyst for change in the industry - and change for the better. Nothing else offers a seamless service to take us from the start to the end of a voyage," said Shell International Trading and Shipping Company Limited's Vice President of Shipping, Jan Kopernicki.

The independent Internet company will provide freight management services, online chartering and freight derivatives, across the $100 billion market in the global movement of wet and dry bulk commodities by sea, the four firms said in a statement.

"This is earth shaking, things are going to get very scary round here," said a broker planning a similar development. "This is how it should be done, they have got what they need - the liquidity. But they will need other brokers to join in," he said.

Involvement of the four, who represent significant oil and grain shipping volumes, would accelerate industry-wide adoption of the marketplace, LevelSeas said.

BP Amoco is one of the world's largest petroleum groups and operates a fleet of 31 crude and product tankers through its marine unit BP Amoco Shipping.

Shell Trading, a member of the Royal/Dutch Shell Group, trades nearly five million barrels of crude oil and products, and moves cargoes on 140 deep-sea tankers and gas carriers around the world daily. It runs a fleet of 53 vessels.

Cargill markets, processes and distributes agricultural, food, financial and industrial products and is a leading ship charterer for dry bulk commodities, such as grain and minerals. It has 82,000 employees in 59 countries.

Clarksons is the world's largest shipbroking group providing services across the full range of dry bulk and tanker sectors.

Based in Europe, LevelSeas will be launched in the third quarter of 2000. No financial details were available.

"The site is open to other brokers - we have had a fairly positive reaction so far," said Shell Trading crude oil chartering manager, Brian Davis. "We recognize the role brokers will have going forward in what is still a very traditional industry," Davis said.

Shell would use the company as its preferred way of transacting shipping business, after building up over a transitional period, Davis said. LevelSeas would also provide an opportunity for the oil shipping business to become increasingly involved in using financial tools such as derivatives to hedge against risks.

A limited number of major industry operators would be approached to become partners, and the company would also seek strategic alliances. - (Paul Berrill, Reuters)