Tradition Still Rules at Shipping Exchange

It’s just before lunch on a Monday and the murmurs and handshakes of men in pinstripes mark another subdued climax to trading at the Baltic Exchange.

The Baltic is the shipping industry’s largest exchange for the matching of empty vessels with cargoes of iron ore, wheat and other bulk goods. It’s a complicated business, yet there’s not a single computer or real-time data screen in sight.

Instead, brokers arrange deals by mingling in a carpeted, Edwardian hall and chatting about tonnages and sailing dates--a world apart from brokers at commodity exchanges who shove and shout in rubbish-strewn trading pits.

“It’s like a cocktail party without the drinks,” said Mike Elsom, head of marketing at the exchange. “It’s really sort of networking.”

In this urgent era of dot-coms and gigabytes, the Baltic remains an anachronistic parlor of commerce where dress codes, telex machines and faith in verbal commitments still reign supreme. Yet in spite of 256 years of tradition, the Baltic is grudgingly facing up to the fact that its genteel trading floor is headed for extinction.

“It’s a very nostalgic thing, but I don’t think we need it anymore,” said Basil Mavroleon of Bray Shipping, which acts as an agent for Greek shipowners.

When Mavroleon became a Baltic representative in 1969, as many as 800 people crowded the exchange floor each business day and for a half-session on Saturdays. Now, fewer than a third of that number bother attending when the trading floor in London’s financial district opens for a mere hour each Monday.

To help pay its expenses, the exchange hires itself out for dinner dances and parties.

The Baltic Exchange began operating in 1744 in a London coffeehouse frequented by merchants and ship captains. Taking its name from the Baltic Sea region, where ships did a brisk trade in tallow at the time, the self-governing organization developed into the world’s foremost shipping exchange.

Ships carry an estimated 98% of the goods traded worldwide, and London has the biggest share of the global bulk freight market.

The Baltic Exchange is a key part of that market, but it’s more than a commercial exchange. It also acts as an industry watchdog and serves as a quasi-social club.

On a recent Monday, some 100 shipping agents and brokers gathered to do business in polite, face-to-face fashion. By 1:30 p.m., the formal session was over, and many of the participants, known as representatives, retired to an upstairs banquet room for lunch, or to the in-house pub. That’s where the business of shipping really gets done, over a plate of salmon tartare with vodka sauce or pints of “monthly guest lager.”

In addition to dining and drinking on the premises, members can attend seminars and join clubs for scuba diving and other recreational activities. Representatives or their employers pay annual dues ranging from 500 pounds, or $800 to 21,000 pounds, or $33,600.

“It’s a club, but it’s a club for a purpose. Business does get done,” said Richard Bell, straining to be heard over the lunchtime din at the Baltic Bar. Bell works for Dataworks, which supplies shipping software to exchange members.

Mavroleon acknowledged that e-mail and screen-trading have made it less important for shipping brokers to physically attend trading sessions.

But he fretted that dwindling attendance at the sessions, especially by younger people in the industry, threatens the network of personal relationships that have enabled the industry to regulate itself.

“Because the shipping business is so mobile, you need to have a big element of trust,” he said. “Sometimes there isn’t actually a signed contract until well after a ship is loaded and ready to sail.”

One of the exchange’s hallmarks is its code of conduct. Operating under the motto of “Our word our bond,” the Baltic has suspended members for misrepresenting their business.

It also requires men on the trading floor to wear business suits and to leave earrings and other “fashion wear” at home.

The shipping business is one of the last bastions of the telex machine, and the popularity of this vintage form of communication has retarded the Baltic’s ability to adapt to new technologies. As a result, brokers still roam the floor distributing handouts listing the details and destinations of vessels.

“It cries out to be taken electronic,” Elsom said of the practice.

Just this month, an Internet-based shipping exchange called LevelSeas.com became the latest online service that threatens to nibble away at the Baltic’s business.

Michael Guthrie, a director of the exchange, acknowledged that computers and the Internet will probably make the Baltic trading floor obsolete within five years. He endorsed that change in the interest of greater efficiency.

“In a way,” he conceded, “it’s almost like pulling the rug from beneath itself.”