So sang recent Nobel Prize winner Bob Dylan several decades ago. SeaProf is quite sure that the world’s best known maritime economist, Martin Stopford, would endorse Dylan’s famous lyric in relation to shipping in 2016 and the future. The ‘gambling’ (buy low, sell high) strategies must stop, says Stopford, so as to prevent the recurring over tonnaging cycles and the freight rate collapses they ultimately cause.
Hanjin Shipping’s collapse has evidently provided a severe warning to the container sector and its seemingly ‘irrational exuberance’ in relation to economies of scale and mega ship builds. As for the offshore and project vessel sectors, they have suffered their own Saudi orchestrated collapse with the massive drop in oil prices. The dry bulk sector has also taken a hammering as a dying infrastructure investment wind left China’s construction boom sails flapping.
The one thing that all shipping sectors have in common is that they have all taken positive action to survive the downturn and re-position for an upturn. Scrapping and minimal ordering of new tonnage has been common across the board. Consolidation has also been the order of the day with the weaker players being bought out by the stronger. The container sector has seemingly perfected the art of the ‘alliance’ so as to market together and co-ordinate tonnage, but avoid allegations of anti-competitive behaviour. The offshore sector, known for its ‘cost no object’ mentality, has quickly learned how to run ‘lean and mean’ as well as tap into new opportunities e.g. wind farm installation. As for dry bulk, the focus seems to have been on scrapping, commercial pooling and energy efficiency to wring every penny from the charter party revenue lemon.
Yes, some have fallen by the wayside and these fallen include ship owners, operators, banks (who sold off their ship finance portfolios) and shipyards. As such, it’s all very Darwinian in that it’s not the necessarily the strongest that survive but those who are simply the most adaptable to change. So is there a lesson for all of us here? In short, what is our adaptability to change both personally and on the corporate front?
Futurists challenge us with concepts such as ‘big data analysis’, real time ship data transfer, autonomous ships, cognitive computers and robotics. All of these concepts offer huge opportunities to the shipping community in terms of dealing with fuel efficiency, cargo and voyage planning, compliance with air pollution and ballast water legislation as well as the reduction of crew costs and ship maintenance. Will we embrace and apply these concepts or will we ignore them as a part of our in-built resistance to change? What will be the impact? A short extract from a Splash 24/7 interview with futurist KD Adamson is as below:
Shipping is becoming information-enabled and shifting onto an exponential growth curve rather than the linear one [counter cyclical investment in tonnage] we’re used to. In the relationship between the two, there’s an inflection point after which those on the exponential curve begin to accelerate away very quickly. The difference is so dramatic that catching [up with] them soon becomes pretty much impossible. Shipping could well reach that inflection point in 2017.
A bit ‘cyber-speak’? Here’s a simple but dramatic example. SeaProf started his career at sea with a British shipping company as the container was first being introduced into commercial use by a US company, Sea Land (now a division of Maersk). The container concept was considered by many British and European owners and terminal operators at that time as being ‘a stupid American idea that would never catch on’. The container of course went on to revolutionise the traditional liner trades and the concept of maritime logistics. It also changed the world as the ultimate key to globalisation.
So what will be the next major breakthrough that will change the face of shipping forever? More likely it will not be a single idea but the combination and application of existing and developing technology to generate efficiencies in shipping through fuel advances such as LNG and even nuclear power packs, smaller, better trained and safer crews supported by cognitive computer systems, real time performance data transmission assessed at shore stations (as now accomplished by many airlines). With respect to Adamson’s ‘information enablement’ ideas, it appears that big data analysis has the potential to end much of the speculative guess work that goes into expensive and often irrational decisions to buy and build ships in rising but unstable markets.
As we start 2017, the green shoots of a small but measurable global economic upturn may be just poking up above the ground. The US economy is growing steadily. China continues to invest in infrastructure and OPEC has agreed terms to reduce the oil glut which are now impacting positively. Simultaneously, ship scrapping continues apace and consolidation in the offshore, container and multi-purpose markets is the name of the ship owner survival game. As such, it seems like the right time to plan for future modest but ‘steady as she goes’ growth throughout the martime industry.
What will be your growth strategy for 2017 and beyond?
As a starter, perhaps a good time to send new and promising members of your team to the BI/SeaProf 3-day intensive course ‘Key Elements of Shipping’ scheduled for 21-23 March 2017, Singapore. ‘Future shipping’ issues will be discussed and debated in class in conjunction with specialist learning from some of Singapore’s leading maritime industry managers and academics. Generous fee support is available from the Singapore government. Full details can be found on the SeaProf Calendar Page.