The effects of COVID-19 on international shipping are still actively unfolding ⁠— but not only at the West Coast ports where there is a “parking lot” of containerized cargo ships waiting in droves. While container rates have spiked after growing demand in the second half of 2020, causing labor and vessel shortages to ensue, so have freight rates across the entire industry, including those for raw commodities. 

Before COVID-19, ships hauling dry bulk ⁠— like iron ore, coal and grain ⁠— were making somewhere between $7,000 and $10,000 per day. Today, those same ships are making $30,000 a day, three times what they were making just six months ago. The raw commodity market is red hot following a period of pent-up demand. 

For one client alone, a dry bulk ship will carry about 70,000 metric tons of Midwestern corn, for example, from New Orleans to Japan, by way of hundreds of small barges on the Mississippi River. The total cost of transportation for this end-to-end journey is $4 million, including $1 million worth of fuel and a $200,000 fee for loading the corn off the barges and onto the ship.

Like other industry segments, raw commodity shipping lacks visibility, overly depends on third parties and is therefore attracting significant financial interest from venture capitalists. Ocean Freight Exchange (OFE), a multiplatform marketplace that has raised over $6 million now in funding since its launch in 2015, has made significant strides to digitize the bulk and tanker industry. 

In an interview with CEO and co-founder John Hahn, he explained that OFE uses artificial intelligence to disrupt the way deals have historically been done in bulk shipping. By centralizing the location data on live ships, cargo and ports, as well as making market research and vessel history data accessible, charterers and shipowners can more easily and intelligently match ships with their next cargoes. 

“There are tens of thousands of these ships that are tramping around the world, often not knowing where they’re going to go next after they discharge the cargo on board,” said Hahn. “Ten years ago, tracking vessels was pretty difficult. The infrastructure wasn’t good enough, and the data was messy and expensive. There weren’t enough companies providing the right data to build intelligent systems.”

But even as technology advances, there are still issues maintaining data visibility in parts of the South China Sea and Southeast Asia, as satellites cannot keep up with heavy congestion. In other areas of the world, like Iran or Cuba, ships will sometimes turn off their transponders. In piracy zones like in East Africa, the crew might install barbed wire around the ship and hire a couple of former Navy Seals to guard the ship. 

OFE’s matching platform hopes to bring order, data visibility and control to a historically unpredictable part of the freight industry. Thus far, OFE has focused on vessels carrying 20,000 to 80,000 metric tons of cargo, but plans to expand its offerings to both smaller and larger shipments in the future. After securing its latest round of funding, OFE was able to expand its globally dispersed staff to 25 employees, who work remotely from locations such as Singapore, Los Angeles, New York, Mexico City, Mumbai, and Madrid.

“The industry is so traditional and set in their old ways that you have to come from the industry, leave it, and realize, ‘I can create a solution and go back into it.’ You need people from the industry that know the power players and intimately understand the pain points in order to start a venture capital-backed technology company.”

As for Hahn, before launching OFE, he was the managing director of ocean freight at Noble Group and a freight trader at Louis Dreyfus Commodities. One vision that keeps him working and hopeful is providing more options for buyers and sellers, such as farmers. 

Historically and due to a lack of technology, farmers have been forced to just sell to multi-billion dollar conglomerates like Cargill or Louis Dreyfus Commodities. When the corn leaves the farm or is loaded on the barges, the farmers are traditionally done with the deal.

“But why is there a middleman that takes that down the river?” asked Hahn. “Why is there a middleman that then loads that into an elevator? Why is there a middleman that puts the corn on a bigger ship for the Panama Canal and to the customer in Japan? If the farmer had the phone number of the customer buying the grain or OFE’s app to make the match, maybe there wouldn’t be as many middlemen and maybe the farmer would have better options.”