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Dead in the Water: Why shipping stats are becoming unreliable

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By Ami Daniel, co-founder and chief executive of Windward, a specialised data and analytics company

The intricacies of the shipping world should be of great interest to anyone who needs to understand global trade, and especially to commodities traders, so it may shock you to discover that a growing amount of the data traders rely upon is being seriously manipulated on a daily basis.

Ocean-going vessels, the kind that transported approximately half of the US$2,823 (S$3,500) billion in crude imports in 2013 and US$128.692 (S$159.6) billion in exported coal sales in 2012, are mandated by the UN to constantly transmit information on their identity, location and destination in order to promote safety at sea and avoid collisions. With the introduction of nano- and micro-satellites in 2010, this data, known as the Automatic Identification System (AIS), has been picked up by satellites and used across industries, from security agencies to Wall Street traders, to track vessels worldwide.

However, this data has massive vulnerabilities. The AIS system is extremely easy to manipulate since it essentially works on an honour system: ships are mandated to transmit their information but there is no way of verifying that the information is correct.

Decisions are only as good as the data they rely upon, and this is certainly true for trading, where the stakes are high and require a high level of data reliability. Once we know that some of the data is corrupt, taking any of it as face value becomes a game of chance. Changing the AIS system, or human nature, is unlikely. But by employing technology – smart analytics and AIS Cybersecurity measures – to analyse and vet the vast, and increasingly corrupt AIS data, it is now possible to ensure that traders, and anyone else tracking ships, have a reliable picture of ship activity worldwide.

For the full article, please visit hedgefundintelligence.com.