During these unprecedented and challenging times, the business world is navigating through unchartered waters.
The shipping industry itself is of no exemption. The events of the last couple of years have increased uncertainty and raised significant challenges and obstacles to the shipping world and the conduct of maritime operations.
Since March 2020, the pandemic has caused significant disruption to the movement of goods and people hampering the logistics and operations of the maritime industry. With more than 90% of goods in the world transported by ships, the effect of this on the global economy has been unimaginable: port closures, less demand for cargos, seafarers trapped onboard vessels, disputes between owners and charterers pertaining to hire period and lay time settlement, are only some of the challenges that the industry has been facing.
The recent conflict in Ukraine has additionally impacted the industry, having been severely disruptive on the supply chain with shipping routes being cut off, port calling and loading/offloading restrictions, and significantly increasing fuel and raw materials prices.
Other events have also caused disruption of lesser gravity, though still noticeable. Such are the accidental blocking of the Suez canal for 6 days in March 2021 and the seizing of two tankers by the Iranian authorities in the Persian Gulf a few months ago. Adding to these the ever changing regulatory environment, recently with a more stringent protection umbrella to the whole ecosystem, the shipping industry has been extremely busy with facing challenges, managing crisis and overcoming uncertainty.
Despite the above adversities, the events of the last few years have resulted in increased competitiveness in the market, with rising transportation costs and rates attracting new participants, as well as reigniting the fire in traditional market players. This, combined with the always increasing global population and the desire for sustainable economic growth and development, means that demand for new ship buildings is expected to increase, despite the high initial investment cost required and current delays in production caused mainly by COVID19. Furthermore, demand for demolitions has been statistically less than normal – shipowners seem attracted to high rates and thus reluctant to demolish – and borrowers have shown an increased tendency to repay their debts, in many cases earlier than contractually bound, to take advantage of the excess cash coming in.
From the management perspective, the need to maintain experienced and readily available crisis management and leadership teams is becoming of paramount importance in order to navigate the organizations through the constant, and in many cases, unpredictable challenges. Such teams should of course be equipped with significant industry experience, expertise and capabilities, so that they can deal with and manage client relationships, business partners expectations and personnel frustration including work-life balance concerns. In addition, fresh ideas and critical modern day thinking is essential in achieving this.
The use of technology is also of great importance to shipping. Technology can be used in a number of areas to improve efficiency, increase revenues and profitability, reduce costs, minimize the environmental footprint and increase competitiveness. Technological advancements and tools can help, not only with building eco-friendly vessels, but also with engine performance optimization, with enabling remote access to the vessel operator that would have otherwise required physical presence, with reducing vessel accidents by assisting vessels to stay accurately on course, and can even help to avoid piracy incidents, to name but a few. The benefits of using advanced technologies are multiple and immediate.
Cyprus, being a traditional maritime leader, can play a significant role in navigating through this period of continuing uncertainty and of unparalleled industry challenges. The continuously developing and business approach orientated Department of Merchant Shipping, the presence of traditional ship owning and ship management companies with vast experience, the competitively priced high quality professional services offered in all support areas, the access to properly and adequately qualified personnel, as well as the country’s rapid growth into a reputable international headquartering and information technology hub, have helped Cyprus become the ideal destination for every industry participant.
*Board Member, Audit and assurance services, KPMG Cyprus