A conversation about the demand side gap for the freight market

During our conversation with Michael Ryan, our Freight Commodity Owner at Sparta, who has over a decade of experience in the energy trading sector, we discussed the current challenges facing the freight market. We covered the lack of demand-side insights and bespoke tools for freight and explored why Sparta for Freight will be a game-changing advantage for freight market participants.

Sparta’s ground-breaking, forward-looking market intelligence is coming for freight. Built by freight traders for freight traders, Sparta for Freight will provide live global arb-driven CPP freight market forecasting from real-time supply and demand data. Due to release in Summer 2024.

A conversation with Michael Ryan, our man leading the charge of Sparta’s upcoming freight vertical. 

Can you please give a brief introduction to yourself and your experience? 

I’m Michael Ryan. I’ve been in the commodity trading industry for twelve years. I worked for a private trading company called Trafigura, where I gained experience across different divisions and locations worldwide. In the last several years, before joining Sparta, I was a freight trader on Trafigura’s wet shipping desk. 

In your view, what are the persistent challenges currently faced by the freight market? 

The freight market lacks a clear view of vessel demand. While it has a precise idea of supply, including the locations of vessels, their arrival times at specific ports, and their availability for charter, the demand side is more challenging. This is where Sparta’s strengths come into play. Understanding the arbitrage (ARB) level across all products a tanker can carry helps better determine the demand for those vessels. 

Why is a lack of insight into demand such a big problem for the freight market? 

There is a significant information gap, especially for ship owners without access to, say, a gasoline trading desk. They can’t simply ask a product trader if an ARB is open or if there is demand for gasoline barrels. This lack of insight affects even the large oil majors as well as the large private trading houses. Their shipping desks struggle to understand the demand for the products their ships carry and, consequently, the demand for the ships themselves. 

And how will Sparta for Freight solve this problem? 

Sparta for Freight leverages Sparta’s extensive arbitrage data, which has been collected daily for over three years. We’ve analysed dozens of correlations based on historical arbitrage data and its impact on freight rates. By using this data, we can better predict freight rate trends based on the profitability of various product arbitrages across regions. 

What will differentiate Sparta for Freight from any other freight tool available on the market? 

Existing freight tools lack forward-looking capabilities. They rely on AIS satellite data to track ship locations and return times to ports but fail to predict demand at those ports upon arrival. Sparta offers forward-looking information by combining historical arbitrage data with real-time arb margins, providing insights that other market tools miss. 

Who is Sparta for Freight built for? 

Sparta for Freight is designed for the entire freight market, from ship owners to freight analysts. Ship owners and charterers will benefit from insights into the regional demand trends for their vessels, enabling them to secure better rates. Freight traders and paper traders will have demand-based rate forecasts alongside vessel supply forecasts, allowing them to time their trades more effectively. Physical traders will be able to better position their fleet according to predicted demand for their vessels.  

How should the market use Sparta for Freight? 

The tool should be utilised like an additional analyst. If the Sparta freight data doesn’t align with your market view, it should prompt further investigation, and if it does, then it should provide added conviction for your trade. Ship owners and charterers can use the platform to optimise fixtures with optimal routes and cargoes highlighted, alongside spot rate predictions. The ability to see live incremental demand and supply side by side is invaluable. Traders focused on paper trading or hedging can use Sparta for Freight to gain more insight into every trade, seeing which arbitrages are driving key FFA routes across CPP regions. 

In your view, how has the freight market changed since you started? 

When I started in the industry, there were very few analytical tools for shipping. New hires would spend most of their day tracking cargoes and manually reporting updates to the commercial team. Deals were made over the phone and through online chat services, with no live screen trading of freight. This was only twelve years ago! Since then, more robust analytical platforms have emerged to track ships and global product movements. Sparta for Freight represents the next step forward for the shipping market in the increasingly data-driven world of commodity trading. 

Book your demo today to see Sparta for Freight in action.

Freight is just the next step in Sparta’s journey, which will eventually lead us to add full barrel coverage to our platform in the long-term. In the short to medium term, Sparta will be adding verticals on a frequent basis throughout 2024.

If you’re interested in our upcoming freight vertical, and want to learn more, please visit: the freight page on our website, contact us at sales@spartacommodities.com, or book a demo to secure your early adopter advantage.

Michael Ryan, our Freight Commodity Owner at Sparta, brings over a decade of experience in the energy trading sector. His career started and flourished at Trafigura managing risk across products and regions before becoming Head of Risk for subsidiary Puma Energy. Michael then joined the Trafigura commercial team trading clean and gas freight while successfully growing the physical fleet through strategic dealmaking.