The coming 12 months could prove to be a pivotal year for the maritime industry.
If, as many hope, it marks the nadir of the downturn that began almost a decade ago, 2017 may be seen as ‘the beginning of the end’. If, on the other hand it proves to be a continuation of recent trends, then it might instead prove to be another year of ‘the new normal’ in which the industry adapts to structural changes.
As a result, threats and opportunities for the industry exist in a close relationship, with many representing opposing points of view on what shape our industry will take in future.
Beginning with the most immediate threats, the industry is rightly concerned that 2017 brings a further slowdown in the global economic growth and therefore lack of growth in shipping demand. At the same time, there is concern that political changes from East to West mean an era of global policy in which growing protectionism creates unpredictable effects on shipping.
We have already heard rhetoric about the risks to existing trade agreements and there is concern that planned and pending deals may not come fully to fruition.
At the same time, policies that threaten previously agreed climate conventions - though they appear to favour fossil fuels - also create uncertainty for shipping. Volatility in major bulk commodities might create increased cargo movements in the short term but do not necessarily provide a stable platform for sustainable growth. The re-starting of oil production in previously embargoed countries has added volume to the market, but in some cases reduced total tonne miles.
This creates a regulatory touchpoint, principally on how smoothly the IMO can move forward in its work on collecting shipping’s CO2 emissions data and ultimately move towards setting a CO2 budget for shipping and appropriate reduction targets.
More pressing for 2017 is the threat of further movement towards regional regulations, whether on environmental or safety issues, that do not support a level playing field in step with, and co-ordinated through the International Maritime Organization.
The industry will also face a significant technology risk which will continue well beyond the coming 12 months. Even if the US Coast Guard is able to approve the ballast water treatment systems it has under test and the IMO is able to agree on an implementation date for the Ballast Water Management Convention, the industry still faces uncertainty around implementation, adoption and the costs of compliance.
It is already trying to gauge and the prepare for a new era of ‘low sulphur shipping’ following the agreement struck at MEPC 70 and issues of fuel availability, quality and the impact on prices are significant considerations.
A continuing challenge will be the need to attract and retain qualified and high quality people – onboard and ashore. This is especially true for those men and women we need to support the transition to an era of ‘smart shipping’, which will change the skills mix by adding new demands to traditional crew competence.
At the crossroads of threat and opportunity is ‘disruption’ of the shipping industry – either by technological advances or challenges to its traditional business model and client relationships.
Many consider shipping is vulnerable to disruption precisely because it thinks itself well defended from this threat. An asset-heavy, capital intensive business model may reinforce shipping’s belief in its exceptionalism, but we should be aware that entrepreneurs will see openings where we may not.
I strongly believe that disruption is also an opportunity; one that gives us the chance to examine customer relationships and the quality of our service delivery. If we believe that ‘business as usual’ will no longer be good enough then it is up to the industry to embrace new technologies as key to long term sustainability.
It might also be argued that there is an opportunity arising from regulations. In particular the requirements of the both the IMO and EU to collect data that will be used to calculate carbon emissions could be viewed as a means by which many can take the first step in understanding energy efficiency.
This may seem counterintuitive – administration is considerable unless automated – but smart owners have already begun planning their compliance strategies, co-operating and collaborating where they can. Without understanding this sort of fundamental data it is not possible to understand where and how improvements can be made.
This creates a knock-on opportunity for owners who by using data such as that collected for compliance, have the chance to obtain a deeper understanding of the performance of their ships and their fleet.
With that understanding comes a much greater focus on the areas that can be leveraged to drive optimisation and operational efficiencies that can deliver real savings.
By the same logic it is possible to view 2017 as the first year of the transition to an era of public appreciation of cleaner shipping. Time is short to grasp what the move to alternative fuels in 2020 will mean for operations, but if properly realised it will be positive in terms of a supply chain alternatives and better public perception. As such, we should be doing everything we can to talk about it externally.
Lastly, the use of technology – probably the defining issue of this decade – will continue to create opportunities in 2017.
Even in an era of lower fuel prices, the need for efficiency has hardly been greater. Unlike in previous downturns, shipping has the ability to embrace new concepts that can streamline or simplify ship operations, lower administrative burdens, increase remote support from shore, and create a roadmap that moves towards greater automation and improved safety.
Some of these are already happening today, some will evolve over time but the embrace of an ‘exponential’ digital economy means we may be surprised at the speed of the changes as the next 12 months unfolds.
* VP, Global Marine, ABS