April 29, 2025 • 39 mins
🎙 Episode 106: The Evolving Role of Freight Trading in a Digital World
Guest: Mads Frank Markussen, Head of Research and FFA, Navi Merchants and CM Navigator (Copenhagen Merchants Group)
Overview:
From chartering desks to freight analytics, Mads Frank Markussen bridges operational experience with digital innovation in maritime trading. In this episode, we explore how Navi Merchants builds freight models that empower — not replace — traders, the enduring value of brokers, and why FFAs are gaining ground in a volatile market.
Key Points:
- Data models must serve the trader, not the other way around.
- Despite digitalization, brokers and relationships remain critical.
- Entrepreneurs can really bloom in Denmark,
- Mads' maritime DNA runs deep.
Related Episodes:
– Episode 70 with Jeff Wakker (Viterra)
– Episode 54 with Scott Bergeron (Oldendorff)
🎧 Listen now on Spotify, Apple Podcasts, YouTube & more.
💬 Like what you hear?
Please rate the show 5 stars, follow, and share with your network. It really helps spread the word.
☕ Support the show: Buy Me a Coffee — your support helps keep us going strong.
🎶 Music by: Peg and The Rejected “King of SKA”
🎨 Art by: GA Design
🎛️ Produced by: Chris Aversano
🌊 Proud media sponsor of London International Shipping Week 2025
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Christopher Aversano (00:00)
(00:05):
Welcome everyone. You are listening to The Last Dinosaur and I'm your host, Chris Aversano. This is the podcast where we explore the evolving maritime landscape and hear from the innovators leading that charge. Today I'm thrilled to welcome Mods Frank Marketson, Head of Research and FFA and Navi Merchants AS, part of the Copenhagen Merchants Group. Freight trading has been one of those areas that have always been targeted for digitalization and the improvements and efficiencies that go along with it.
We'll talk what ModsFrank has been doing at Navi merchants and how CM Navigator plays a role in that transformation. ModsFrank, thank you for coming on and welcome to the podcast.
Mads Frank (00:38)
Thank you very much, Chris. I'm very thrilled to be here and I look forward to a great episode.
Christopher Aversano (00:42)
(00:30):
Absolutely, you know, I mean, if you go back to the beginning and the first tech bubble back in 20, the early 2020s, the freight trading part was the part that everybody glommed onto, tried to change immediately, and as hot and fast as it came in, it faded. let's, before we get into that, so that's why I'm really excited to talk to you today. Let's talk a little bit about your background and how you've gotten here, and more interestingly,
about what the different companies within the Copenhagen Merchants Group are doing because I think that that's where it's very interesting.
Mads Frank (01:17)
Yes, we are a conglomerate. Copenhagen Merchants Group consists of, I think, 60 different legal entities across 20 different countries. Most notably for what we are doing within, let's say, the maritime space, we have the ship owning part, Navi Merchants. We have the world's largest grain brokerage, Copenhagen Merchants. This is the original company. We have our digital company, the CM Navigator, where we build models for grain and freight markets.
But we also own CM Terminals, which owns eight or nine ports and terminals throughout the Baltic. And then Schultz Shipping and Stuart Dooring, which is like a port agency in, I think, 15 different ports throughout the Baltic. We also are minority owner in CM Biomass, which was spun off a few years ago, the world's largest biomass trader, which owns, let's say, more interesting for the American listeners, a terminal in the port of Savannah, shipping wood pedals to Europe.
(00:55):
which these days looks like a bit of a difficult trade, but so far in the last 10 years it's been good trade.
Christopher Aversano (02:16)
Well, yeah, we could talk about politics on a different podcast. But yeah, no, that's very interesting, all those different arms. And tell me a little bit about your evolution, because you've been kind of on the FFA side of the desk and kind of doing a lot of things. Really curious to hear about how you got to where you are today.
Mads Frank (02:34)
My background comes very much from good old school shipping. My dad used to be a chief engineer at a Merck vessel, a tanker vessel. He sailed around Asia in the good old 80s. I also have an uncle who sailed around the world a few times. He claims to be one of the first persons sailing Coca-Cola into China on a container ship for Merck. You know, with all sea ferries, I don't know how much is true, but you get a certain, let's say, taste of the culture and the heritage. Merck is a very big company in Denmark.
(01:20):
But I actually started my career in Norton as a trainee in the operations and chartering departments doing dry bulk. So I was very, let's say, traditional shipping man from Denmark, fixing ships, operating voyages, ordering bunkers, whatever you do as a very traditional ship owner or ship trader. My evolution comes in three steps. The next step was when I moved to Switzerland to work for Louis Dreyfus. I worked as a freight trader.
And the way you view things sitting in a greenhouse is very different than when you sit at a Danish operator or Danish ship owner. You're much more financial. You look at things much more holistically because does it really matter if you lose $4 on the freight, if you can make $6 on the cargo? Yes, it does. But if you're a ship owner, you're not part of that equation in a way where it can make sense to leave money on the table for one part of the company.
Third, let's say, leg in this evolution was when I came home from Dreyfus. I was part of a company. We made good money during the 2022 boom. Great fun. Traded everything. Everything from a handy size to a cape size FFA during those days. was a wild ride. After that, I was a bit saturated with the front line trading. So I decided to pursue something new.
And that's when I came into contact with Copenhagen merchants. I knew them obviously from my Dreyfus days and I know the guy who's the CEO of the Navi merchants, but they had an ambition to start building models around their data and around what they do in real life. And I had been a part of that project in Louis Dreyfus where they wanted to do the same. So it was fairly plug and play for me, obviously in a different context and so on. But I would say those three.
STEPS are my major career, let's say milestone so far.
(01:45):
Christopher Aversano (04:55)
So when you look at modeling, and I think that this is really kind of the interesting part here, right? Because we're going to hear more and more about modeling and whether it's on the front end of the trading side or even backend or I guess, tangential on the emission side or even modeling, let's say to merge and other things, you could probably get into a lot of really interesting topics there. talk about how the evolution of that,
how maybe you're using some technology such as AI or MI. And how does modeling really start to look at things like we alluded to before, like tariffs? In other words, the black swan events. Because I think that that's where you can use modeling for some of the more normal type trades. But when it gets to things getting a little outside of the normal, such as
the Red Sea closure because of the Evergreen ship and now the Red Sea closure or at least partial closure for some folks because of the Huthi attacks. You look at COVID, you look at all these things that we really didn't see, we would see in shipping but spaced out. they're more on top of each other. That makes modeling a lot more difficult. I'd like you to walk through some of your thought process on that and some of your feelings about kind of how you're dealing with it.
Mads Frank (06:10)
(02:10):
Let me start another place. When I was a trainee in Northern, they realized, okay, let's focus on data. Let's focus on predictive modeling, but let's start within something where we can sort of control the variables. So they set up a fuel efficiency department. They hired a guy from, I think he came from Merck to say, hey, we don't see this anywhere in the market as a commercial software. Can you build us a model that can predict fuel consumption? Because we can see...
that going slow-steaming could maybe make sense. We never tried slow-steaming before, but it makes sense on the spreadsheet. But can you build us these models? So this guy went shut out, and he started collecting all the data in the world. 300 chips, every noon report, every weather report, et cetera. So he built a model. The guy is still there, so presumably it's a great success here, I think, 14 years later. But I think this is a very good example of a use case everyone can understand.
You optimize on speed versus higher versus fuel consumption. There is a P &L with that and it's kind of easy to track. I think this is the, let's say step one in the evolution of predictive modeling within dry bulk shipping. Now there's a lot of these companies here in Copenhagen. I think there's four or five. I don't know how different their models are. think to be honest, they can predict around two, three days out.
and there may be a few differences in percentage points between the models. So obviously if you're an Orton, that makes a big difference. But for most people, I would argue, it's a solved problem and you need to choose the one you like. Then we go to the next set of problems, which are a bit more opaque, but still somewhat predictable. Something like when should I arrive in my vessel in whatever port to tend the notice of redness. Now, if you're discharging coal, it's shing, it's a...
weather working everything is fine, then it doesn't really matter that much. It's pretty easy to model. But let's say you are coming in with a vessel from the US, you have wheat on board, you're going to Algeria, Morocco, somewhere with notoriously low discharge rate, and in the winter time, it can actually be quite rainy. So you don't really know, am I going to spend 20 days in port or I'm going to spend 30 days, whereas 20 of them is just going to be time lost for weather. Now.
(02:35):
Now you can combine your fuel efficiency prediction model with perhaps a weather forecasting model with perhaps a lay time calculation model. So now you start building, let's say, model inside a model inside a model, which hopefully will make sure that when you have your 50 or 100 vessels and you have to time all of these notice of readiness better. Should I maybe also order overtime? You can always add, let's say, steps to this model in order
to make better suggestions. However, what's very important about, let's say, the bigger the models you build, you need a lot of craftman expertise as a shipping person. A weather routing model, I would argue, a very skilled engineer or weather forecaster can sort of understand the complexities and build, let's say, something that works. But building something where you combine lay time with overtime with fuel efficiency, you need to have worked at a ship. You need to understand these things in order to put it together.
is at least my argument.
Christopher Aversano (09:25)
Yeah, I think that that's one of the things that, you know, we've kind of seen and learned is that when you're building models and a lot of times, you get folks from outside the industry, which is great. I always believe that you got to have people who can bring a different approach. But I think the problem becomes whether it's building this type of model or anything else, you need to have somebody or very, a few somebodies who can
(03:00):
understand and interpret what the pain points are in order for the model to work correctly. So if you have an engineer and she's been at your company forever and kind of maybe operations or engineering got into operations and understands kind of what's going on, you can't ignore that person because she could bring a ton of not only experience, but then can really sniff out the crummy data or a bad output.
I think that that's one of more interesting things is to see what the output is and does it not necessarily conform exactly what you think, but are you in the right area? Are you in the right ballpark as they say here in the US? Okay, that makes sense or this is not what I expected. Why is it giving me this output? And it could be that somebody...
you know, fat fingered, a nude report or it wasn't, it wasn't coded correctly or something. And all of a sudden, you know, they put a 38 degrees west and it's really 38 degrees east. And it gives you something that you don't expect because it, you know, it's not, it's not what you thought. the machine learning or AI didn't pick that up. So I think there is a huge value in that.
Mads Frank (11:03)
And I can say that my, let's say introduction to machine learning was that when all these new reports came into Norton, I had to fact check them and make sure the masters didn't make any mistakes. And they did. So I probably every morning had to resend the 50 emails into the right format with the right values. But you know, that's how you get going. That's how you start today. You can probably get algorithms to do it, but you know, sometimes you got to do the tough work.
(03:25):
Christopher Aversano (11:28)
Yeah.
mean, new reports have been, and I've talked about this before on a podcast, new reports have been one of the, I think, biggest struggles because if you look at things like what is speed, is the speed over ground? If you're giving an ETA to a port, what are you basing it on? I'm basing it on the last 24 hours speed. Yeah, I mean, remember my personal experience, the last 24 hours speed going from, let's say, Corpus Christi getting us mostly across the Gulf.
your next 24 hour speed is going to be very different because you're to go north on the Gulf Stream and you're to make, you know, instead of making turns for 13 knots, you're actually going to make 17 because you're going on the Gulf Stream. So what do you like? How are you going to be looking at that? And I think there's a lot of, uh, there's a lot of that interpretation on what you're trying to do. And there's a lot to be done there, even though it looks like it's a relatively simple task.
Mads Frank (12:19)
(03:50):
Yeah, well, and this sort of leads us also into the most difficult of models, the ones where you are trying to predict human behavior or markets, so to say, because the cool thing about shipping, is one of the magical features of trading this market is there's actually a lot of human agency which constantly changes back and forth. For example, the best example I can think of is if you're an owner.
And you are in Asia and you can either fix a trip out in Indonesia or can ballast into South America. You can choose to ballast in full speed, can ballast in slow steam. You can sail towards the Black Sea or to South America, most likely South America these days, but you have options. So you can kind of adjust supply depending on how much is needed. Likewise, the chargers have multiple options. They can start taking period vessels, they can buy FFA, they can relay it on voyage, they can buy a single trip.
And depending on what is the mood, what is going up, going on, it can really swing. I have a good example from this week. I was out eating with one of my friends who works as a Panamax head of something in a Panamax company. And once Trump wrote his tweet about the terrorist was paused, the Panamax bid offer curve from centers to China jumped two dollars. Like it makes no sense.
I demand soybeans China to South America China, but sentiment matters and it matters. And if you are not on this, you are in for a real treat.
Christopher Aversano (13:43)
(04:15):
yeah, I remember trading.
I remember trading, you know, and just, you know, one of my colleagues used to say something like irrational exuberance, right, when the market was going up. Now he was, one of his bigger accounts was one of the largest US oil, not an oil major, I think they've technically called it independent, but big, big company, lots of refineries, so.
He was always, oh, this is a rational exuberance. And sometimes it was, you sometimes the market would just jump because let's say there was, you know, three cargos on a Monday morning when everybody thought there'd only be two. And all of a sudden, you know, the list looks a little bit tighter. And then there was that rumor of that other cargo and then some traders are sniffing around. Now I'm talking on a tanker side, I'm sure it has its comparison to other ways. But I just, you know,
Mads Frank (14:30)
It's the same.
(04:40):
Christopher Aversano (14:34)
I mean, there is a level of human touch psychology that will always be part of the market. And I know some, where they're trying to get like these automatic freight trading systems are saying, let's get that out of there. But I always come back to curious to hear your, your thought on this are things like, the brokers being involved in this and, and, and the freight trading platforms that are out there.
are people like, they're to rid of brokers. I always think that people are going to want brokers because there's a level of protection on a lot of things, whether it's operationally, whether it's things like, hey, we got to make sure that that ship's not sanctioned. I want a separate set of eyes on this, you know, and all these sort of things on the oil side, making sure that the ship is, is a good ship that if, that it has its sire and other type stuff, even though that's done within the process,
you're a little bit of the ears and the eyes on the ground, but I'm really curious to hear your take on that, with respect to like what you're hearing from some of the brokers, you know, about as you're rolling things out and as you're using technology more and more.
Mads Frank (15:39)
(05:05):
I think it's a really big question with a few different angles. Keep in mind we have the world's largest grain brokerage, so we are very much focused on what is the future of brokerage. And out of the thousand scenarios we can cook up in our head, let's all of them have humans in it. Because the thing that you're doing as a broker is helping your principal, whether it's a buyer or seller, make sense of the world and protect his or her interests.
Now, no matter how many computers you put in between, you would still need someone who can assist you and help you. The difference between, say, grain brokers and vessel brokers is that in shipping, historically, it's been the seller, i.e. the ship owner, who has paid the ship broker's commission. Therefore, they named ship broker. And the reason why they have been so valuable in shipping is because a ship can go to anywhere in the world.
There are, let's say, 50 different geographical regions in the world if you are a handy-sized ship owner. But you cannot have 50 offices. I think even Norton have only seven or eight offices to cover the whole world. So if you are a Greek owner, have maybe five handies, know, half in the East, half in the Atlantic, and then one on the West Coast, you needed to work with people who would protect your interests. No matter how much AI you do, you're not going to work 24 hours a day if you're Greek ship owner. You're not going to open eight offices. So you're still going to need ship brokers.
to help you navigate this world. Now, freight buyers have for many years had it a bit easier because in general, they tend to be more geographically focused. Now, as the world is becoming smaller, consolidation, digitalization, financialization, more and more charters are getting bigger and bigger. I could imagine it's the same in oil. So more and more brokerages have also to become global brokerages, but it's the same use case. So we see it in grain.
we're seeing it in ship brokers, that people are not sidestepping humans. Humans are still very much needed. And I don't know what you're hearing and seeing, but we're not seeing it here at least.
(05:30):
Christopher Aversano (17:42)
What I, I think there is, especially in maybe about eight to 10 years ago, there was a, you know, another wave, the second bubble, so to speak. And I think, again, there was a lot of, of the brokerage community, especially folks who were around the first time around, like, this is never going to work. This is never going to work. And then as some of the younger guys came in, I don't think they had that attitude. I, I think that they had more of an attitude of,
we're gonna have to live with this and how can we use this to our advantage, right? Because the difference between a really successful ship broker who can make a lot of money and somebody who's a little bit more moderate successful, someone who's washed out, I think all comes down to two things. One, relationship and two, the information, right? So if you have a good relationship with somebody, even though you may not be the best, if you're like best buddies, you're always gonna make money and that always happens. It's not as sustainable but...
It is a thing that's happened that I've seen it happen. But I do think it's going to come down to adopting and adapting to what the principles are going to want, whether that is things like, hey, I want API feeds of fixtures. I want API feeds of voyages. You know, I want to be connected to your system or I want you to be connected to our system. So instead of making a phone call to tell me what my ETA is, you can.
But I also want the ETA to come through an alert on my system, whatever that system is, right? And I used to work for Vesson, so IMO system or something else. I want that alert to come through or I want an update to come on my smartwatch about a market change. And I think that there are a lot of those sort of things. Again, it's going to be the human in the loop because you're going to ultimately have to make that decision. I mean, negotiating clauses. I know there's a few companies out there that are trying to
(05:55):
get that clause process in AI and things like that. Although I could see that ended up like some clause buried way down there getting changed. And all of a sudden it actually happens and, I didn't know that AI did it. That's going to be that that'll happen in the next five years. But generally what I think is, is I think the brokers, brokers that adapt and adopt to technology and what it does is it actually may even, even the playing field.
with the smaller guys who may have a little bit of tech savvy or can work with, an AI or outsource somebody for a short while to build a platform that can access other platforms. I think that that's the way of the future. those companies that adopt to that would be great. The other part too is the data that they collect. I've always argued, it's three parts, right? Ship owners own ships.
Cargo owners own cargoes, brokers own data, and that was always like, a second afterthought, but now that data's becoming more more important, especially as you mentioned, you have a ship broker that only covers, let's say, west coasts of the US and Central America for handies. Yeah, okay, they're not competing against with the big, getting the big commissions for doing iron ore into China or out of Brazil or whatever, but they have a niche and...
And that, that data that they have is valuable because it's not ubiquitous.
Mads Frank (20:53)
(06:20):
I think it is a very good point. And I think also that markets have a tendency of adjusting yourself. If you're a Panamax broker out of South America, you're one out of 20 competing. If you're a West Coast broker, you're one out of five. People need to live. People need to make a salary. There are, of course, these absolute sharks who can fix seven days a week. However, from what I hear and the numbers I've been exposed to is that in a, let's say, large scale ship brokerage,
Around 75 % of all personnel is loss making. 25 % is actually pulling in the commission. So this monster, Panama broker out of South America, he needs four guys who calls everyone, feeds him, and then he connects the dots. And I think...
Christopher Aversano (21:38)
Yeah. Yeah. I think,
I think it's, I'm going to just jump in here and I started to wrap, but I think the way that the curve was always explained to me, and this was on the tanker side, the first three to two, three years, you kind of don't make anything. You may lose a little money, but your job is to collect reports, collect position lists, help distribute those. If, you know, somebody who's fixing a lot needs a hand in writing a recap, you do all that sort of grunt work.
(06:45):
order pizza, whatever, because I did that for a while too. And then like year three to five, six, seven, you're breakeven or breakeven plus, right? So you should be covering your salary, your here in the US, your healthcare, whatever, right? So you should be, and then year five on, you should be making money to support yourself and then others, right? And then that's always been kind of
what was explained to me as the general curve. Now, some folks just come in and, you get it goes out of relationships. They got a buddy they went to school with and, here I'll give you, you know, one Sue is max a car, cargo in London. You you kind of like already ahead of the curve or as other people like here kid call these accounts that never pick up the phone to us and good luck. And, you know, usually it's somewhere in the middle, but yeah, it's, it's, it's definitely right that you're probably right that, that, that
You know, need a bunch of folks, you know, 25, 30 % of that group is making the big money and everybody else is just kind of keeping the lights on. But you can't, if you lose them, then that 25 % becomes either less efficient or they're working more and they'll burn out or make a mistake.
Mads Frank (23:19)
Or,
(07:10):
and this is of course speculating because I don't work in a ship brokers or some of this grunt work will be done by machines. And I think also it depends on what is the role of the ship broker and the relationship to the principle as you alluded to before. I can give a practical example from my own days. When I sat in Northern Adraefis, there was not a single broker which we believed had superior, let's say, market information, calculation, AI data.
Christopher Aversano (23:26)
Absolutely.
Mads Frank (23:48)
Some had bits and pieces we needed and we needed to call around, but ultimately our mantra was we knew best. We knew what we wanted to buy. We knew what we wanted to sell. So the brokers we wanted to work with was not super tech savvy data driven. It was the exact opposite. And it was those people who are so amazing with other people that they can make unbelievable things happen in between other people. So when I myself work, let's say Black Sea.
(07:35):
I worked with a couple of Greek brokers. They didn't have much of digital tech, but they knew everyone and their cousin, and they knew exactly how to get things done in a way where everyone was happy. This had a lot of value to us because, you know, Dreyfus had terminals in the black seat back then. There was a whole program we needed to fix with these guys once a month. So we went to all the other end of the scale for certain purposes. Now, for other purposes, let's say South America, it was a bit more digital tech savvy.
maybe not exactly API in positions, but it was a bit of a different way you work with brokers because it's a different market. And I think, as you say, it will be even more different for tanker vessels or for chemical tankers or whatever it is, depending on what market you're trading.
Christopher Aversano (24:56)
yeah.
yeah, it's not going anywhere. It's just gonna look different, which is what I tell people all the time. You did mention the Baltic a few times and you guys kind of have your start there. And that's really your focus. You've mentioned that. Are you looking to expand out of that? Or are you looking to kind of try to repeat this model in other areas? Or are you very happy with the Baltic and just gonna see how things played out, especially under the current geopolitical environment that we're in?
(08:00):
Mads Frank (25:25)
It's a bit of a funky question because before we sold most of the CN biomass to USTC or Bunker Holding, we had this port terminal in Savannah, 10 factories in the US. I think also a lease of a terminal in Vietnam and something in South Korea. So it was like a global operation that's been sold off. So all the assets left are the Baltic ones. And this is mainly for historical reasons.
ABCD companies, the Bumke, the Cargills, the Dreyfus, they did not invest in the Baltics in the, you know, 100 years ago, 50 years ago, because it was communist. Nobody could do it. They invested in South America, in the US, in Australia, in Asia, even a bit in Africa in the, let's say, the more stable parts. So once Baltic opened up and CM Group or Copenhagen Merchants was already present in Denmark, Germany, Sweden, it was quite, let's say, easy.
to jump into the other places. Now, the thing that Comhec merchants do, which I think is a cool thing because it creates a different kind of thinking is we do a lot of joint ventures. So some of the terminals are owned with Aiterra. Some of the terminals are owned with Bungie. Some of the terminals are owned with outside investors because we'd rather have 10 terminals and own whatever 51 % than have five terminals we own 100 % because it mitigates some risk. We are more...
In the trades, can have benefits of scale. We have offices in Brazil, we have offices in Dubai, have, let's say, satellite offices, partners in the US and Asia. So we are sort of global, but not in the same way that, let's say, cargo or a bungie is. But we are getting there because grain shipping is a global market. And what the price is for wheat out of Poland is sometimes defined with what are people willing to pay in Indonesia.
(08:25):
So you need to be close to your Indonesian buyers and you need to know what is the freight rate.
Christopher Aversano (27:21)
And that makes all the sense in the world as you start to build out, as you explained earlier. We go back to the beginning and you're in a part of a bigger group and we've seen this in other ones, especially in Denmark, you have NORD and Merse tankers, you have the Signal Group out of Greece, and they kind of have a technology bend to it. Talk about a little bit of the challenges and the advantages of
building a platform and talk a little bit about the platform you're trying to build out and working in an environment that has, let's say, physical assets and how they come together because this is something that we talked a little bit before we got going. This is something that's happening all over the place and happening more.
Mads Frank (28:02)
(08:50):
So five or six years ago, the owner realized that we're sitting on a lot of data, but it's difficult to connect. It's difficult to put together because the way we were communicating was purely through WhatsApp. So we had, I don't know, 30 grain brokers worldwide who communicated all the bits and offers via WhatsApp. And whereas in shipbroking, you can maybe say, okay, I do hand-sized continents. So we have a group for that. In grain, everything is global.
So it was one big mess, thousand messages a day. So he, together with, let's say, the head of Geneva office decided, let's build a platform. Let's make it simple. It's gonna be Excel, Power BI, very prototype-ish, but let's get it going. So this guy in Geneva, who was, despite being 60 years old, he was quite tech savvy and a bit of a workaholic. I think he went to his summer house for a week and he built by himself a working prototype.
And it worked. It kind of, let's say, proved the business case that, hey, there's a better way to communicate internally. Then came the second step. He was like, well, I would also like to see what is the supply demand. What are the vessels on water? What are the lineups? What are all these things that a good grain broker would need to serve some of his customers? So he started building that. And that was actually quite good traction. think, and now I'm not 100 % sure on this number, but it was something like 25 of our
group customers who decided to use this platform because it was better than what they had internally, which is okay, validated, but it had its limitation. Excel, Power BI, you're sort of limited with how much can you scale, how fast, these kind of things. So the owner decided to spin it out and invest some real money in it, hire software engineers, build it properly. And this is sort of where I come into the equation because
Christopher Aversano (29:40)
(09:15):
Right. Right, right.
Mads Frank (29:53)
large part of connecting bits and offers in the grain world is having the freight. Because everyone in Spain who buys wheat for their mill or corn for their pork, they sit and do netback calculations and say, should I buy from the US? Should I buy from Romania? Should I buy from Brazil? What do I do? What is the puzzle here? What are the pieces I'm working with? There are some spreadsheets existing internally in the big, let's say, grain houses. I helped build one in LDC where we did, let's say.
5,000 routes and maybe 10,000 routes for, let's say, a few selected traders to get the concept going. The owner here at Copenhagen Merchants was like, I don't want 5,000, I want 500,000. And we're like, okay, theoretically, it should be possible, we'll show me and another guy who was a software engineer, we probably spent a few hours a day for half a year scoping this thing. Like, how do you put this together computationally?
because the logic for calculating a freight rate is the same for one rate of 500,000. But putting all the pieces together and having it run, let's say every half hour is another hurdle. In the end, we managed, we made it happen. I think we ended up having something like 60 different data tables with shipping data and more than, I think, 5,000 lines of code. But we made it happen. So he was very happy because now for any given trade, we can connect what are the freight rate
(09:40):
from Clipeda to all 500 ports in the world where people buy wheat. So this is sort of where, let's say, where we started. Then we said, okay, now let's connect it to all the grain prices. So if we have, let's say, 10,000 grain prices times 500,000 freight rates, it gets into the millions. And suddenly we can start putting together puzzles together with, let's say, trade flows data, lineups data.
And now suddenly the customer is like, okay, this is something we really like. So we decided to make it payable. The customers would have to pay for it because it's after all cost fair bit of money to build these things. But so far it's been a good success. We have, I think, 80 customers on board. And I think out of the 50 largest grain trading or grain companies in the world, think something like 90 % are customers. Now it's just about scaling it, making it better, making it bigger,
So it's been quite the journey so far because we are venturing a bit into the unknown. We haven't found anyone where we can look and say, hey, let's copy their homework. Let's just do like Amazon did because it's not the same business case.
Christopher Aversano (32:26)
No, no, no,
(10:05):
no, it's really interesting. And it kind of leads me to another question that I love to ask is, when you look back and you're talking to somebody, you're going to hire at any one of the groups who's new to the industry, let's say, and has a good opportunity to go work someplace else. I know you're in Denmark, so let's just, if it's not Merck, maybe it's Lego. So let's say they want to go work at Lego and you're like, no, no, no, come work.
I joke about people come to the dark side, we have cookies, so come to shipping. What do you tell people about shipping who may not have knowledge? Now, it's different in Denmark because Merck is such a big employer and you're a lot more exposed to, let's say, than people here in the US or other places, but how do you kind of explain your job and how you're excited about it and what it means in the future? Forget about today, but what's the next five, 10 years hold for somebody joining our industry?
Mads Frank (33:19)
I think what makes Denmark so amazing, or let's say Danish shipping so amazing, is the high level of freedom. You're basically allowed to travel anywhere, try anything. You can set up your own company online in two minutes. So a lot of entrepreneurial people who are not necessarily dreaming of going five years to university, they seek towards shipping. Shipping is also a bit of, let's say, a prestige career. In Switzerland, it's commodities. In the US, it's maybe working for hedge fund. But in Denmark, it's shipping.
So you have a lot of, let's say, talent looking to prove something coming into shipping. think Merck, they had a really good model, let's say 30, 40 years ago, where you spend two years at headquarters and then you were sent four years to Indonesia, Malaysia. You had sort of a budget and they were like, go make the most of this. And because they had maybe a hundred of these people every year, they had a lot, quite large talent pool. So the ones who rises to the top were extremely gifted business people.
(10:30):
who had seen many things in this life. A little bit of this model still exists. I have a lot of friends and colleagues who, for example, Norton went abroad. They spent maybe three years in Singapore and two years in China before coming back. So in Denmark, more or less everyone doing shipping has spent time abroad and has this entrepreneurial go-get-them spirit. I think Lego is amazing for many, purposes, but I think it's a bit different. It's a very, let's say, mature company.
Merck is also today is a very mature company. You almost need like a PhD in software to come work on the new problems. But let's say Drybolt shipping, Tanger shipping, super entrepreneurial. Just look at the, let's say Hafnir, what they achieved in 10 years.
Christopher Aversano (35:00)
Yeah,
it's pretty amazing. And I look at Denmark as well as definitely as a beacon in our industry for that Singapore certainly. And you've seen other places, Hamburg and Israel as well, which is more on the entrepreneurial side investing and things like that. And I had some really serious conversations recently with folks about, the US capture some of that?
(10:55):
with what's going on politically. One interesting thing is there's going to be at least on paper, a lot of interest in shipbuilding and shipping on the US side. So maybe there's some avenues for entrepreneur spirit here in the US as well. As we wrapped up, I love asking this question, you know, got a lot on the hop, doing a lot of things. So, you know, what is the latest book or article or something that kind of came across your desk that
that you really kind of are reading or really shaped your thinking recently.
Mads Frank (35:56)
I have two books that comes to mind. The first one is called The Man Who Sold the Market and it's about a guy named Jimmy Simmons who started a hedge fund called Renaissance Technologies. He used to work for the CIA or something in the 60s, became a math professor and then when he was 40 he said, you know what, I can beat these guys. And he actually set out and did it. And for I think 35 years, they achieved an annual return of 30%.
And what I like most about that story is not the hedge fund America big money, but how it was so practical when he started. He was like, we need to trade commodities. You open the corner, take your car, drive to Chicago, go to the basement and take the last 50 years of ticker recordings on soybean futures. You, you go to Kansas, you record this. So the first five years, they spent assembling all kinds of weird niche data before anything called API or spreadsheet even existed.
(11:20):
And it's quite an amazing story about incremental entrepreneurship, how it starts small and how it builds. Not to say Copenhagen Merchants Group is in the same league, but it started in a basement, one man, then he had another man, then they started renting some terminal capacity, then they started investing a bit in a... So just add one acquisition per year and suddenly you have quite a big company.
So this I can really enjoy as let's say a vacation read. It's quite entertaining and well written. So that's my first book I can recommend. The second one is let's say one that's important for the times. It's by another hedge fund manager called Ray Dalio. Very famous in the USA or maybe infamous I should say. He has at least from what I can read a very special approach to how he runs his company. I don't know, I never worked there.
But his book on geopolitics, world orders and a history of how has economic history been from, say, an investment currency portfolio point of view are super well written, super interesting. And also something that these days when you're seeing the break off of this Pax Americana, NATO maybe not working more, the USA isolating a bit itself, trying to corner China. you know, there's so many thoughts in his book.
which become relevant because he also spent a very large amount of time in China and has also become quite rich in the last 30 years of knowing what is going on in China. So these are the two books I can recommend. I think it's called The Changing World Order or something like that. He read he written multiple and they're all very
Christopher Aversano (38:27)
(11:45):
Yeah,
he's really good. He's been weighing in a lot on the recent political turmoil. And I guess with what you're saying, given his background and kind of his expertise makes a lot of sense. Well, Amaz Frank, this was fantastic. Thank you for sharing your journey and kind of what you're doing and a little bit your thoughts about everything from how a grain trader should approach things and how things have changed to...
what your view is on the brokers in the world as well. Not just ship brokers, but all brokers. It's never going to go away. It's just going to look a little different. And I love hearing what the companies with an S at the end are doing and kind of taking a digital direction. So thank you for coming on the pod. Much appreciated.
Mads Frank (39:09)
Yeah, thank you for having me. It was a real pleasure and I learned a thing or two which is always worth something.
(12:10):
Christopher Aversano (39:14)
which is always worth something. Yeah, you always gotta learn things too. Thanks for coming out, appreciate it.
Christopher Aversano (00:00)
(00:05):
Welcome everyone. You are listening to The Last Dinosaur and I'm your host, Chris Aversano. This is the podcast where we explore the evolving maritime landscape and hear from the innovators leading that charge. Today I'm thrilled to welcome Mods Frank Marketson, Head of Research and FFA and Navi Merchants AS, part of the Copenhagen Merchants Group. Freight trading has been one of those areas that have always been targeted for digitalization and the improvements and efficiencies that go along with it.
We'll talk what ModsFrank has been doing at Navi merchants and how CM Navigator plays a role in that transformation. ModsFrank, thank you for coming on and welcome to the podcast.
Mads Frank (00:38)
Thank you very much, Chris. I'm very thrilled to be here and I look forward to a great episode.
Christopher Aversano (00:42)
(00:30):
Absolutely, you know, I mean, if you go back to the beginning and the first tech bubble back in 20, the early 2020s, the freight trading part was the part that everybody glommed onto, tried to change immediately, and as hot and fast as it came in, it faded. let's, before we get into that, so that's why I'm really excited to talk to you today. Let's talk a little bit about your background and how you've gotten here, and more interestingly,
about what the different companies within the Copenhagen Merchants Group are doing because I think that that's where it's very interesting.
Mads Frank (01:17)
Yes, we are a conglomerate. Copenhagen Merchants Group consists of, I think, 60 different legal entities across 20 different countries. Most notably for what we are doing within, let's say, the maritime space, we have the ship owning part, Navi Merchants. We have the world's largest grain brokerage, Copenhagen Merchants. This is the original company. We have our digital company, the CM Navigator, where we build models for grain and freight markets.
But we also own CM Terminals, which owns eight or nine ports and terminals throughout the Baltic. And then Schultz Shipping and Stuart Dooring, which is like a port agency in, I think, 15 different ports throughout the Baltic. We also are minority owner in CM Biomass, which was spun off a few years ago, the world's largest biomass trader, which owns, let's say, more interesting for the American listeners, a terminal in the port of Savannah, shipping wood pedals to Europe.
(00:55):
which these days looks like a bit of a difficult trade, but so far in the last 10 years it's been good trade.
Christopher Aversano (02:16)
Well, yeah, we could talk about politics on a different podcast. But yeah, no, that's very interesting, all those different arms. And tell me a little bit about your evolution, because you've been kind of on the FFA side of the desk and kind of doing a lot of things. Really curious to hear about how you got to where you are today.
Mads Frank (02:34)
My background comes very much from good old school shipping. My dad used to be a chief engineer at a Merck vessel, a tanker vessel. He sailed around Asia in the good old 80s. I also have an uncle who sailed around the world a few times. He claims to be one of the first persons sailing Coca-Cola into China on a container ship for Merck. You know, with all sea ferries, I don't know how much is true, but you get a certain, let's say, taste of the culture and the heritage. Merck is a very big company in Denmark.
(01:20):
But I actually started my career in Norton as a trainee in the operations and chartering departments doing dry bulk. So I was very, let's say, traditional shipping man from Denmark, fixing ships, operating voyages, ordering bunkers, whatever you do as a very traditional ship owner or ship trader. My evolution comes in three steps. The next step was when I moved to Switzerland to work for Louis Dreyfus. I worked as a freight trader.
And the way you view things sitting in a greenhouse is very different than when you sit at a Danish operator or Danish ship owner. You're much more financial. You look at things much more holistically because does it really matter if you lose $4 on the freight, if you can make $6 on the cargo? Yes, it does. But if you're a ship owner, you're not part of that equation in a way where it can make sense to leave money on the table for one part of the company.
Third, let's say, leg in this evolution was when I came home from Dreyfus. I was part of a company. We made good money during the 2022 boom. Great fun. Traded everything. Everything from a handy size to a cape size FFA during those days. was a wild ride. After that, I was a bit saturated with the front line trading. So I decided to pursue something new.
And that's when I came into contact with Copenhagen merchants. I knew them obviously from my Dreyfus days and I know the guy who's the CEO of the Navi merchants, but they had an ambition to start building models around their data and around what they do in real life. And I had been a part of that project in Louis Dreyfus where they wanted to do the same. So it was fairly plug and play for me, obviously in a different context and so on. But I would say those three.
STEPS are my major career, let's say milestone so far.
(01:45):
Christopher Aversano (04:55)
So when you look at modeling, and I think that this is really kind of the interesting part here, right? Because we're going to hear more and more about modeling and whether it's on the front end of the trading side or even backend or I guess, tangential on the emission side or even modeling, let's say to merge and other things, you could probably get into a lot of really interesting topics there. talk about how the evolution of that,
how maybe you're using some technology such as AI or MI. And how does modeling really start to look at things like we alluded to before, like tariffs? In other words, the black swan events. Because I think that that's where you can use modeling for some of the more normal type trades. But when it gets to things getting a little outside of the normal, such as
the Red Sea closure because of the Evergreen ship and now the Red Sea closure or at least partial closure for some folks because of the Huthi attacks. You look at COVID, you look at all these things that we really didn't see, we would see in shipping but spaced out. they're more on top of each other. That makes modeling a lot more difficult. I'd like you to walk through some of your thought process on that and some of your feelings about kind of how you're dealing with it.
Mads Frank (06:10)
(02:10):
Let me start another place. When I was a trainee in Northern, they realized, okay, let's focus on data. Let's focus on predictive modeling, but let's start within something where we can sort of control the variables. So they set up a fuel efficiency department. They hired a guy from, I think he came from Merck to say, hey, we don't see this anywhere in the market as a commercial software. Can you build us a model that can predict fuel consumption? Because we can see...
that going slow-steaming could maybe make sense. We never tried slow-steaming before, but it makes sense on the spreadsheet. But can you build us these models? So this guy went shut out, and he started collecting all the data in the world. 300 chips, every noon report, every weather report, et cetera. So he built a model. The guy is still there, so presumably it's a great success here, I think, 14 years later. But I think this is a very good example of a use case everyone can understand.
You optimize on speed versus higher versus fuel consumption. There is a P &L with that and it's kind of easy to track. I think this is the, let's say step one in the evolution of predictive modeling within dry bulk shipping. Now there's a lot of these companies here in Copenhagen. I think there's four or five. I don't know how different their models are. think to be honest, they can predict around two, three days out.
and there may be a few differences in percentage points between the models. So obviously if you're an Orton, that makes a big difference. But for most people, I would argue, it's a solved problem and you need to choose the one you like. Then we go to the next set of problems, which are a bit more opaque, but still somewhat predictable. Something like when should I arrive in my vessel in whatever port to tend the notice of redness. Now, if you're discharging coal, it's shing, it's a...
weather working everything is fine, then it doesn't really matter that much. It's pretty easy to model. But let's say you are coming in with a vessel from the US, you have wheat on board, you're going to Algeria, Morocco, somewhere with notoriously low discharge rate, and in the winter time, it can actually be quite rainy. So you don't really know, am I going to spend 20 days in port or I'm going to spend 30 days, whereas 20 of them is just going to be time lost for weather. Now.
(02:35):
Now you can combine your fuel efficiency prediction model with perhaps a weather forecasting model with perhaps a lay time calculation model. So now you start building, let's say, model inside a model inside a model, which hopefully will make sure that when you have your 50 or 100 vessels and you have to time all of these notice of readiness better. Should I maybe also order overtime? You can always add, let's say, steps to this model in order
to make better suggestions. However, what's very important about, let's say, the bigger the models you build, you need a lot of craftman expertise as a shipping person. A weather routing model, I would argue, a very skilled engineer or weather forecaster can sort of understand the complexities and build, let's say, something that works. But building something where you combine lay time with overtime with fuel efficiency, you need to have worked at a ship. You need to understand these things in order to put it together.
is at least my argument.
Christopher Aversano (09:25)
Yeah, I think that that's one of the things that, you know, we've kind of seen and learned is that when you're building models and a lot of times, you get folks from outside the industry, which is great. I always believe that you got to have people who can bring a different approach. But I think the problem becomes whether it's building this type of model or anything else, you need to have somebody or very, a few somebodies who can
(03:00):
understand and interpret what the pain points are in order for the model to work correctly. So if you have an engineer and she's been at your company forever and kind of maybe operations or engineering got into operations and understands kind of what's going on, you can't ignore that person because she could bring a ton of not only experience, but then can really sniff out the crummy data or a bad output.
I think that that's one of more interesting things is to see what the output is and does it not necessarily conform exactly what you think, but are you in the right area? Are you in the right ballpark as they say here in the US? Okay, that makes sense or this is not what I expected. Why is it giving me this output? And it could be that somebody...
you know, fat fingered, a nude report or it wasn't, it wasn't coded correctly or something. And all of a sudden, you know, they put a 38 degrees west and it's really 38 degrees east. And it gives you something that you don't expect because it, you know, it's not, it's not what you thought. the machine learning or AI didn't pick that up. So I think there is a huge value in that.
Mads Frank (11:03)
And I can say that my, let's say introduction to machine learning was that when all these new reports came into Norton, I had to fact check them and make sure the masters didn't make any mistakes. And they did. So I probably every morning had to resend the 50 emails into the right format with the right values. But you know, that's how you get going. That's how you start today. You can probably get algorithms to do it, but you know, sometimes you got to do the tough work.
(03:25):
Christopher Aversano (11:28)
Yeah.
mean, new reports have been, and I've talked about this before on a podcast, new reports have been one of the, I think, biggest struggles because if you look at things like what is speed, is the speed over ground? If you're giving an ETA to a port, what are you basing it on? I'm basing it on the last 24 hours speed. Yeah, I mean, remember my personal experience, the last 24 hours speed going from, let's say, Corpus Christi getting us mostly across the Gulf.
your next 24 hour speed is going to be very different because you're to go north on the Gulf Stream and you're to make, you know, instead of making turns for 13 knots, you're actually going to make 17 because you're going on the Gulf Stream. So what do you like? How are you going to be looking at that? And I think there's a lot of, uh, there's a lot of that interpretation on what you're trying to do. And there's a lot to be done there, even though it looks like it's a relatively simple task.
Mads Frank (12:19)
(03:50):
Yeah, well, and this sort of leads us also into the most difficult of models, the ones where you are trying to predict human behavior or markets, so to say, because the cool thing about shipping, is one of the magical features of trading this market is there's actually a lot of human agency which constantly changes back and forth. For example, the best example I can think of is if you're an owner.
And you are in Asia and you can either fix a trip out in Indonesia or can ballast into South America. You can choose to ballast in full speed, can ballast in slow steam. You can sail towards the Black Sea or to South America, most likely South America these days, but you have options. So you can kind of adjust supply depending on how much is needed. Likewise, the chargers have multiple options. They can start taking period vessels, they can buy FFA, they can relay it on voyage, they can buy a single trip.
And depending on what is the mood, what is going up, going on, it can really swing. I have a good example from this week. I was out eating with one of my friends who works as a Panamax head of something in a Panamax company. And once Trump wrote his tweet about the terrorist was paused, the Panamax bid offer curve from centers to China jumped two dollars. Like it makes no sense.
I demand soybeans China to South America China, but sentiment matters and it matters. And if you are not on this, you are in for a real treat.
Christopher Aversano (13:43)
(04:15):
yeah, I remember trading.
I remember trading, you know, and just, you know, one of my colleagues used to say something like irrational exuberance, right, when the market was going up. Now he was, one of his bigger accounts was one of the largest US oil, not an oil major, I think they've technically called it independent, but big, big company, lots of refineries, so.
He was always, oh, this is a rational exuberance. And sometimes it was, you sometimes the market would just jump because let's say there was, you know, three cargos on a Monday morning when everybody thought there'd only be two. And all of a sudden, you know, the list looks a little bit tighter. And then there was that rumor of that other cargo and then some traders are sniffing around. Now I'm talking on a tanker side, I'm sure it has its comparison to other ways. But I just, you know,
Mads Frank (14:30)
It's the same.
(04:40):
Christopher Aversano (14:34)
I mean, there is a level of human touch psychology that will always be part of the market. And I know some, where they're trying to get like these automatic freight trading systems are saying, let's get that out of there. But I always come back to curious to hear your, your thought on this are things like, the brokers being involved in this and, and, and the freight trading platforms that are out there.
are people like, they're to rid of brokers. I always think that people are going to want brokers because there's a level of protection on a lot of things, whether it's operationally, whether it's things like, hey, we got to make sure that that ship's not sanctioned. I want a separate set of eyes on this, you know, and all these sort of things on the oil side, making sure that the ship is, is a good ship that if, that it has its sire and other type stuff, even though that's done within the process,
you're a little bit of the ears and the eyes on the ground, but I'm really curious to hear your take on that, with respect to like what you're hearing from some of the brokers, you know, about as you're rolling things out and as you're using technology more and more.
Mads Frank (15:39)
(05:05):
I think it's a really big question with a few different angles. Keep in mind we have the world's largest grain brokerage, so we are very much focused on what is the future of brokerage. And out of the thousand scenarios we can cook up in our head, let's all of them have humans in it. Because the thing that you're doing as a broker is helping your principal, whether it's a buyer or seller, make sense of the world and protect his or her interests.
Now, no matter how many computers you put in between, you would still need someone who can assist you and help you. The difference between, say, grain brokers and vessel brokers is that in shipping, historically, it's been the seller, i.e. the ship owner, who has paid the ship broker's commission. Therefore, they named ship broker. And the reason why they have been so valuable in shipping is because a ship can go to anywhere in the world.
There are, let's say, 50 different geographical regions in the world if you are a handy-sized ship owner. But you cannot have 50 offices. I think even Norton have only seven or eight offices to cover the whole world. So if you are a Greek owner, have maybe five handies, know, half in the East, half in the Atlantic, and then one on the West Coast, you needed to work with people who would protect your interests. No matter how much AI you do, you're not going to work 24 hours a day if you're Greek ship owner. You're not going to open eight offices. So you're still going to need ship brokers.
to help you navigate this world. Now, freight buyers have for many years had it a bit easier because in general, they tend to be more geographically focused. Now, as the world is becoming smaller, consolidation, digitalization, financialization, more and more charters are getting bigger and bigger. I could imagine it's the same in oil. So more and more brokerages have also to become global brokerages, but it's the same use case. So we see it in grain.
we're seeing it in ship brokers, that people are not sidestepping humans. Humans are still very much needed. And I don't know what you're hearing and seeing, but we're not seeing it here at least.
(05:30):
Christopher Aversano (17:42)
What I, I think there is, especially in maybe about eight to 10 years ago, there was a, you know, another wave, the second bubble, so to speak. And I think, again, there was a lot of, of the brokerage community, especially folks who were around the first time around, like, this is never going to work. This is never going to work. And then as some of the younger guys came in, I don't think they had that attitude. I, I think that they had more of an attitude of,
we're gonna have to live with this and how can we use this to our advantage, right? Because the difference between a really successful ship broker who can make a lot of money and somebody who's a little bit more moderate successful, someone who's washed out, I think all comes down to two things. One, relationship and two, the information, right? So if you have a good relationship with somebody, even though you may not be the best, if you're like best buddies, you're always gonna make money and that always happens. It's not as sustainable but...
It is a thing that's happened that I've seen it happen. But I do think it's going to come down to adopting and adapting to what the principles are going to want, whether that is things like, hey, I want API feeds of fixtures. I want API feeds of voyages. You know, I want to be connected to your system or I want you to be connected to our system. So instead of making a phone call to tell me what my ETA is, you can.
But I also want the ETA to come through an alert on my system, whatever that system is, right? And I used to work for Vesson, so IMO system or something else. I want that alert to come through or I want an update to come on my smartwatch about a market change. And I think that there are a lot of those sort of things. Again, it's going to be the human in the loop because you're going to ultimately have to make that decision. I mean, negotiating clauses. I know there's a few companies out there that are trying to
(05:55):
get that clause process in AI and things like that. Although I could see that ended up like some clause buried way down there getting changed. And all of a sudden it actually happens and, I didn't know that AI did it. That's going to be that that'll happen in the next five years. But generally what I think is, is I think the brokers, brokers that adapt and adopt to technology and what it does is it actually may even, even the playing field.
with the smaller guys who may have a little bit of tech savvy or can work with, an AI or outsource somebody for a short while to build a platform that can access other platforms. I think that that's the way of the future. those companies that adopt to that would be great. The other part too is the data that they collect. I've always argued, it's three parts, right? Ship owners own ships.
Cargo owners own cargoes, brokers own data, and that was always like, a second afterthought, but now that data's becoming more more important, especially as you mentioned, you have a ship broker that only covers, let's say, west coasts of the US and Central America for handies. Yeah, okay, they're not competing against with the big, getting the big commissions for doing iron ore into China or out of Brazil or whatever, but they have a niche and...
And that, that data that they have is valuable because it's not ubiquitous.
Mads Frank (20:53)
(06:20):
I think it is a very good point. And I think also that markets have a tendency of adjusting yourself. If you're a Panamax broker out of South America, you're one out of 20 competing. If you're a West Coast broker, you're one out of five. People need to live. People need to make a salary. There are, of course, these absolute sharks who can fix seven days a week. However, from what I hear and the numbers I've been exposed to is that in a, let's say, large scale ship brokerage,
Around 75 % of all personnel is loss making. 25 % is actually pulling in the commission. So this monster, Panama broker out of South America, he needs four guys who calls everyone, feeds him, and then he connects the dots. And I think...
Christopher Aversano (21:38)
Yeah. Yeah. I think,
I think it's, I'm going to just jump in here and I started to wrap, but I think the way that the curve was always explained to me, and this was on the tanker side, the first three to two, three years, you kind of don't make anything. You may lose a little money, but your job is to collect reports, collect position lists, help distribute those. If, you know, somebody who's fixing a lot needs a hand in writing a recap, you do all that sort of grunt work.
(06:45):
order pizza, whatever, because I did that for a while too. And then like year three to five, six, seven, you're breakeven or breakeven plus, right? So you should be covering your salary, your here in the US, your healthcare, whatever, right? So you should be, and then year five on, you should be making money to support yourself and then others, right? And then that's always been kind of
what was explained to me as the general curve. Now, some folks just come in and, you get it goes out of relationships. They got a buddy they went to school with and, here I'll give you, you know, one Sue is max a car, cargo in London. You you kind of like already ahead of the curve or as other people like here kid call these accounts that never pick up the phone to us and good luck. And, you know, usually it's somewhere in the middle, but yeah, it's, it's, it's definitely right that you're probably right that, that, that
You know, need a bunch of folks, you know, 25, 30 % of that group is making the big money and everybody else is just kind of keeping the lights on. But you can't, if you lose them, then that 25 % becomes either less efficient or they're working more and they'll burn out or make a mistake.
Mads Frank (23:19)
Or,
(07:10):
and this is of course speculating because I don't work in a ship brokers or some of this grunt work will be done by machines. And I think also it depends on what is the role of the ship broker and the relationship to the principle as you alluded to before. I can give a practical example from my own days. When I sat in Northern Adraefis, there was not a single broker which we believed had superior, let's say, market information, calculation, AI data.
Christopher Aversano (23:26)
Absolutely.
Mads Frank (23:48)
Some had bits and pieces we needed and we needed to call around, but ultimately our mantra was we knew best. We knew what we wanted to buy. We knew what we wanted to sell. So the brokers we wanted to work with was not super tech savvy data driven. It was the exact opposite. And it was those people who are so amazing with other people that they can make unbelievable things happen in between other people. So when I myself work, let's say Black Sea.
(07:35):
I worked with a couple of Greek brokers. They didn't have much of digital tech, but they knew everyone and their cousin, and they knew exactly how to get things done in a way where everyone was happy. This had a lot of value to us because, you know, Dreyfus had terminals in the black seat back then. There was a whole program we needed to fix with these guys once a month. So we went to all the other end of the scale for certain purposes. Now, for other purposes, let's say South America, it was a bit more digital tech savvy.
maybe not exactly API in positions, but it was a bit of a different way you work with brokers because it's a different market. And I think, as you say, it will be even more different for tanker vessels or for chemical tankers or whatever it is, depending on what market you're trading.
Christopher Aversano (24:56)
yeah.
yeah, it's not going anywhere. It's just gonna look different, which is what I tell people all the time. You did mention the Baltic a few times and you guys kind of have your start there. And that's really your focus. You've mentioned that. Are you looking to expand out of that? Or are you looking to kind of try to repeat this model in other areas? Or are you very happy with the Baltic and just gonna see how things played out, especially under the current geopolitical environment that we're in?
(08:00):
Mads Frank (25:25)
It's a bit of a funky question because before we sold most of the CN biomass to USTC or Bunker Holding, we had this port terminal in Savannah, 10 factories in the US. I think also a lease of a terminal in Vietnam and something in South Korea. So it was like a global operation that's been sold off. So all the assets left are the Baltic ones. And this is mainly for historical reasons.
ABCD companies, the Bumke, the Cargills, the Dreyfus, they did not invest in the Baltics in the, you know, 100 years ago, 50 years ago, because it was communist. Nobody could do it. They invested in South America, in the US, in Australia, in Asia, even a bit in Africa in the, let's say, the more stable parts. So once Baltic opened up and CM Group or Copenhagen Merchants was already present in Denmark, Germany, Sweden, it was quite, let's say, easy.
to jump into the other places. Now, the thing that Comhec merchants do, which I think is a cool thing because it creates a different kind of thinking is we do a lot of joint ventures. So some of the terminals are owned with Aiterra. Some of the terminals are owned with Bungie. Some of the terminals are owned with outside investors because we'd rather have 10 terminals and own whatever 51 % than have five terminals we own 100 % because it mitigates some risk. We are more...
In the trades, can have benefits of scale. We have offices in Brazil, we have offices in Dubai, have, let's say, satellite offices, partners in the US and Asia. So we are sort of global, but not in the same way that, let's say, cargo or a bungie is. But we are getting there because grain shipping is a global market. And what the price is for wheat out of Poland is sometimes defined with what are people willing to pay in Indonesia.
(08:25):
So you need to be close to your Indonesian buyers and you need to know what is the freight rate.
Christopher Aversano (27:21)
And that makes all the sense in the world as you start to build out, as you explained earlier. We go back to the beginning and you're in a part of a bigger group and we've seen this in other ones, especially in Denmark, you have NORD and Merse tankers, you have the Signal Group out of Greece, and they kind of have a technology bend to it. Talk about a little bit of the challenges and the advantages of
building a platform and talk a little bit about the platform you're trying to build out and working in an environment that has, let's say, physical assets and how they come together because this is something that we talked a little bit before we got going. This is something that's happening all over the place and happening more.
Mads Frank (28:02)
(08:50):
So five or six years ago, the owner realized that we're sitting on a lot of data, but it's difficult to connect. It's difficult to put together because the way we were communicating was purely through WhatsApp. So we had, I don't know, 30 grain brokers worldwide who communicated all the bits and offers via WhatsApp. And whereas in shipbroking, you can maybe say, okay, I do hand-sized continents. So we have a group for that. In grain, everything is global.
So it was one big mess, thousand messages a day. So he, together with, let's say, the head of Geneva office decided, let's build a platform. Let's make it simple. It's gonna be Excel, Power BI, very prototype-ish, but let's get it going. So this guy in Geneva, who was, despite being 60 years old, he was quite tech savvy and a bit of a workaholic. I think he went to his summer house for a week and he built by himself a working prototype.
And it worked. It kind of, let's say, proved the business case that, hey, there's a better way to communicate internally. Then came the second step. He was like, well, I would also like to see what is the supply demand. What are the vessels on water? What are the lineups? What are all these things that a good grain broker would need to serve some of his customers? So he started building that. And that was actually quite good traction. think, and now I'm not 100 % sure on this number, but it was something like 25 of our
group customers who decided to use this platform because it was better than what they had internally, which is okay, validated, but it had its limitation. Excel, Power BI, you're sort of limited with how much can you scale, how fast, these kind of things. So the owner decided to spin it out and invest some real money in it, hire software engineers, build it properly. And this is sort of where I come into the equation because
Christopher Aversano (29:40)
(09:15):
Right. Right, right.
Mads Frank (29:53)
large part of connecting bits and offers in the grain world is having the freight. Because everyone in Spain who buys wheat for their mill or corn for their pork, they sit and do netback calculations and say, should I buy from the US? Should I buy from Romania? Should I buy from Brazil? What do I do? What is the puzzle here? What are the pieces I'm working with? There are some spreadsheets existing internally in the big, let's say, grain houses. I helped build one in LDC where we did, let's say.
5,000 routes and maybe 10,000 routes for, let's say, a few selected traders to get the concept going. The owner here at Copenhagen Merchants was like, I don't want 5,000, I want 500,000. And we're like, okay, theoretically, it should be possible, we'll show me and another guy who was a software engineer, we probably spent a few hours a day for half a year scoping this thing. Like, how do you put this together computationally?
because the logic for calculating a freight rate is the same for one rate of 500,000. But putting all the pieces together and having it run, let's say every half hour is another hurdle. In the end, we managed, we made it happen. I think we ended up having something like 60 different data tables with shipping data and more than, I think, 5,000 lines of code. But we made it happen. So he was very happy because now for any given trade, we can connect what are the freight rate
(09:40):
from Clipeda to all 500 ports in the world where people buy wheat. So this is sort of where, let's say, where we started. Then we said, okay, now let's connect it to all the grain prices. So if we have, let's say, 10,000 grain prices times 500,000 freight rates, it gets into the millions. And suddenly we can start putting together puzzles together with, let's say, trade flows data, lineups data.
And now suddenly the customer is like, okay, this is something we really like. So we decided to make it payable. The customers would have to pay for it because it's after all cost fair bit of money to build these things. But so far it's been a good success. We have, I think, 80 customers on board. And I think out of the 50 largest grain trading or grain companies in the world, think something like 90 % are customers. Now it's just about scaling it, making it better, making it bigger,
So it's been quite the journey so far because we are venturing a bit into the unknown. We haven't found anyone where we can look and say, hey, let's copy their homework. Let's just do like Amazon did because it's not the same business case.
Christopher Aversano (32:26)
No, no, no,
(10:05):
no, it's really interesting. And it kind of leads me to another question that I love to ask is, when you look back and you're talking to somebody, you're going to hire at any one of the groups who's new to the industry, let's say, and has a good opportunity to go work someplace else. I know you're in Denmark, so let's just, if it's not Merck, maybe it's Lego. So let's say they want to go work at Lego and you're like, no, no, no, come work.
I joke about people come to the dark side, we have cookies, so come to shipping. What do you tell people about shipping who may not have knowledge? Now, it's different in Denmark because Merck is such a big employer and you're a lot more exposed to, let's say, than people here in the US or other places, but how do you kind of explain your job and how you're excited about it and what it means in the future? Forget about today, but what's the next five, 10 years hold for somebody joining our industry?
Mads Frank (33:19)
I think what makes Denmark so amazing, or let's say Danish shipping so amazing, is the high level of freedom. You're basically allowed to travel anywhere, try anything. You can set up your own company online in two minutes. So a lot of entrepreneurial people who are not necessarily dreaming of going five years to university, they seek towards shipping. Shipping is also a bit of, let's say, a prestige career. In Switzerland, it's commodities. In the US, it's maybe working for hedge fund. But in Denmark, it's shipping.
So you have a lot of, let's say, talent looking to prove something coming into shipping. think Merck, they had a really good model, let's say 30, 40 years ago, where you spend two years at headquarters and then you were sent four years to Indonesia, Malaysia. You had sort of a budget and they were like, go make the most of this. And because they had maybe a hundred of these people every year, they had a lot, quite large talent pool. So the ones who rises to the top were extremely gifted business people.
(10:30):
who had seen many things in this life. A little bit of this model still exists. I have a lot of friends and colleagues who, for example, Norton went abroad. They spent maybe three years in Singapore and two years in China before coming back. So in Denmark, more or less everyone doing shipping has spent time abroad and has this entrepreneurial go-get-them spirit. I think Lego is amazing for many, purposes, but I think it's a bit different. It's a very, let's say, mature company.
Merck is also today is a very mature company. You almost need like a PhD in software to come work on the new problems. But let's say Drybolt shipping, Tanger shipping, super entrepreneurial. Just look at the, let's say Hafnir, what they achieved in 10 years.
Christopher Aversano (35:00)
Yeah,
it's pretty amazing. And I look at Denmark as well as definitely as a beacon in our industry for that Singapore certainly. And you've seen other places, Hamburg and Israel as well, which is more on the entrepreneurial side investing and things like that. And I had some really serious conversations recently with folks about, the US capture some of that?
(10:55):
with what's going on politically. One interesting thing is there's going to be at least on paper, a lot of interest in shipbuilding and shipping on the US side. So maybe there's some avenues for entrepreneur spirit here in the US as well. As we wrapped up, I love asking this question, you know, got a lot on the hop, doing a lot of things. So, you know, what is the latest book or article or something that kind of came across your desk that
that you really kind of are reading or really shaped your thinking recently.
Mads Frank (35:56)
I have two books that comes to mind. The first one is called The Man Who Sold the Market and it's about a guy named Jimmy Simmons who started a hedge fund called Renaissance Technologies. He used to work for the CIA or something in the 60s, became a math professor and then when he was 40 he said, you know what, I can beat these guys. And he actually set out and did it. And for I think 35 years, they achieved an annual return of 30%.
And what I like most about that story is not the hedge fund America big money, but how it was so practical when he started. He was like, we need to trade commodities. You open the corner, take your car, drive to Chicago, go to the basement and take the last 50 years of ticker recordings on soybean futures. You, you go to Kansas, you record this. So the first five years, they spent assembling all kinds of weird niche data before anything called API or spreadsheet even existed.
(11:20):
And it's quite an amazing story about incremental entrepreneurship, how it starts small and how it builds. Not to say Copenhagen Merchants Group is in the same league, but it started in a basement, one man, then he had another man, then they started renting some terminal capacity, then they started investing a bit in a... So just add one acquisition per year and suddenly you have quite a big company.
So this I can really enjoy as let's say a vacation read. It's quite entertaining and well written. So that's my first book I can recommend. The second one is let's say one that's important for the times. It's by another hedge fund manager called Ray Dalio. Very famous in the USA or maybe infamous I should say. He has at least from what I can read a very special approach to how he runs his company. I don't know, I never worked there.
But his book on geopolitics, world orders and a history of how has economic history been from, say, an investment currency portfolio point of view are super well written, super interesting. And also something that these days when you're seeing the break off of this Pax Americana, NATO maybe not working more, the USA isolating a bit itself, trying to corner China. you know, there's so many thoughts in his book.
which become relevant because he also spent a very large amount of time in China and has also become quite rich in the last 30 years of knowing what is going on in China. So these are the two books I can recommend. I think it's called The Changing World Order or something like that. He read he written multiple and they're all very
Christopher Aversano (38:27)
(11:45):
Yeah,
he's really good. He's been weighing in a lot on the recent political turmoil. And I guess with what you're saying, given his background and kind of his expertise makes a lot of sense. Well, Amaz Frank, this was fantastic. Thank you for sharing your journey and kind of what you're doing and a little bit your thoughts about everything from how a grain trader should approach things and how things have changed to...
what your view is on the brokers in the world as well. Not just ship brokers, but all brokers. It's never going to go away. It's just going to look a little different. And I love hearing what the companies with an S at the end are doing and kind of taking a digital direction. So thank you for coming on the pod. Much appreciated.
Mads Frank (39:09)
Yeah, thank you for having me. It was a real pleasure and I learned a thing or two which is always worth something.
(12:10):
Christopher Aversano (39:14)
which is always worth something. Yeah, you always gotta learn things too. Thanks for coming out, appreciate it.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.