The direction of the market is inherent in the tanker supply /demand balance. In theory, if you know where all the tankers available for work are located, and cargo demand, you could predict the market.
In 2010, Dr Scott Borgerson, a US Coast Guard Academy graduate with an impressive array of educational qualifications had an idea on how to use the fact that demand for shipping is predicated on the micro and macro supply situation. This is essential knowledge for tanker brokers. Although he was an experienced mariner, in order to put the theory into practice, he needed to understand in detail the commercial side of the business. He went along to the Connecticut Maritime Association conference and exhibition (CMA Shipping 2010), to meet and talk to the assembled shipping community.
Hedge fund/technology hybrid
The result of this research, and thousands of hours of coding, is CargoMetrics Technologies LLC. This is a hybrid technology and hedge fund organisation that has written algorithms to examine vessel movements and to generate metrics on vessel and cargo supply and demand. The results are used by the hedge fund side of the business to trade freight, commodities and equities on stock exchanges around the world.
Geo-tagging the world
CargoMetrics’ data scientists are sucking up data on commodities using customs data, vessel AIS movements (satellite and terrestrial), images and other raw data from hundreds of sources on a daily basis. The company has a dynamic register of ships (it is no secret that CargoMetrics is working with Clarkson Research Services) and has geo-tagged the global ports. This means that CargoMetrics can track a ship to the berth and then cross-reference the cargo against customs data, images from ports and other data.
Dr Borgerson aims to have a complete and verified picture of world trade in real time. The company even claims to have built a real-time model of China’s gross domestic product: “We aim to be the NSA of global trade”, Dr Borgerson told a hushed CMA audience.
CargoMetrics’ investors have very deep pockets
It is incredibly costly to buy every possible source of trade data, and have a supercomputer to run algorithms in real time to cross-reference sources against vessel movements. CargoMetrics must be generating government-scale quantities of fresh data every day. According to Dr Borgerson, an early investment in Amazon cloud servers is paying dividends. He refused to say more about the inner workings of CargoMetrics, beyond that “we archive all the data – it’s a searchable Google of trade”.
Monetising trade analysis
How does CargoMetrics monetise the output? It gambles. CargoMetrics is a hedge fund that uses its unique data source to trade on hundreds of stock exchanges worldwide. According to Dr Borgerson, so far this year, CargoMetrics has been right 54% of the time.
Tanker brokers beware
This is just the start for CargoMetrics. Having built a global trade model, and trading on the arbitrage between supply and demand, CargoMetrics plans to share its results and techniques with selected partners. According to Dr Borgerson, CargoMetrics has been asked to apply its technique to service the requirements of a large Danish tanker company, widely believed to be Maersk Tankers. This combination would take the algorithms to a new level. If CargoMetrics achieves its goals, it will take away the information discovery role of competitive brokers. By CMA Shipping 2028, some of those who attended CMA Shipping 2018, may no longer have jobs.