What will save the shipping industry? 9 industry thought leaders weigh in

What will save the financial industry

Early this month CNBC’s headline read: “Shipping industry faces consolidation, government bailouts that won’t fix low demand issue” and one day later the Wall Street Journal’s headline was: “More Pain Ahead for Ocean Shipping”, so it’s an understatement that the shipping and maritime industries are having financial troubles. Amidst all this gloom and doom, we asked several thought leaders in the shipping and maritime industries to give us their thoughts on what might help companies adjust in these difficult economic times. Here is their advice to shipping industry decision makers on how to forge ahead. (Got any thoughts on the crisis for our readers? Tweet to us at @KNectmaritime or post a comment below!)

Marthe Lamp Sandvik, Head of Tanker Analysis Research, Lorentzen & Stemoco AS,  @lampmarthe

“The overcapacity on the supply side is a prevailing problem in most shipping markets at the moment. The past few years have seen low interest rates help facilitate debt-driven expansion, with overcapacity following not only shipping, but also in a number of commodities markets such as iron ore and oil as a result. Increased scrapping activity and ordering constraint will help to clear this up on the shipping side though, in time.”

“On the bright side, in Norway we see a number of Shipowners investing in developing digital solutions in this trough, which is not only impressive but important to cut costs and increase competitiveness with new future solutions. Digitalization in the shipping industry has been slow to take hold, but we still have the chance to create our own solutions and shape digitalization in our industry instead of adapting to what could be less optimal solutions originating from outside our industry. But it takes visionary business leaders, who are willing to make an investment in a poor market into something with yet unknown returns and profitability potential. But this development is moving fast, and those who choose to ignore it completely are also likely to be late-comers to new business models and ways of increasing company profitability.”

Peter Sand, Chief Shipping Analyst, BIMCO @BIMCO_PS

“Fortunately we have the destiny in our own hands. Bringing back profitability to dry bulk ship owners and operators, requires first and foremost industry-wide actions. The work has been cut out for us (in BIMCOs roadmap to recovery), now the excess capacity must go. A scenario with zero net fleet growth can be achieved by today’s leaders of the industry as it has been done by past spearheads of it.”

“No quick fixes are around, the medicine is known to all, it’s bitter, but you need to take it to recover.”

Brent Bruun, Chief Operating Officer, KVH Industries @KVH

“The shipping industry can move forward toward a smarter business approach by taking advantage of enhanced connectivity and content delivery services to reduce costs. These services include training programs, maintenance information, or simply moving large amounts of data back and forth in a timely way. With enhanced, affordable connectivity, owners and operators can use data analytics to improve their operational efficiency. For example, the cost-savings in running predictive maintenance programs and monitoring the engine and mechanical systems on the vessel can be sizable in the ability to prevent things from failing in the first place. Recruitment costs can also be reduced by providing quality news, sports, and entertainment content onboard, as an enhanced crew welfare benefit to keep top-caliber crew and officers.”

You can hear more from Brent Bruun at Shipping2030 Asia on November 30.

Karen Thomas, Editor, LNG World Shipping @LNGKaren

“Tougher climate-change targets have put global shipping emissions under intense scrutiny. The IMO has just decided to implement a global 0.5 per cent sulphur cap from 2020, not 2025. Shipowners have three options: burn more expensive distillates, install scrubbers or switch to alternative fuels. Making that switch will not come cheap. However, LNG offers a cleaner-burning solution than conventional marine fuels – and the supply glut has pushed down prices. Cheaper gas strengthens the case to switch to LNG as marine fuel. The challenge now is to invest in infrastructure – to get LNG to where it is needed, to persuade more shipowners to make that switch.”

Janet Porter, Editor-in-Chief, Containers Lloyd’s List @JanetPorter_LL

“Container lines are suffering from some of the worst conditions the industry has ever endured, largely because of the delivery of a new generation of ultra-large vessels at a time when trade growth is very weak. The huge capacity supply and demand imbalances have pushed freight rates to record lows and forced one global carrier into bankruptcy. An unprecedented round of consolidation is now under way that will result in at least four fewer players by the end of 2016, while two new global alliances are due to inaugurate services in April 2017. But far more ships will need to be scrapped or laid up in order to lift prices and improve financial results. However, with many more new buildings in the pipeline, the process of restoring profitability is likely to take several years.”

Brian D. W. Kirk, CEO & Co-Founder, Hive Maritime @bdwkirk

“The macroeconomics of the shipping industry will not change overnight. But, when the dust settles, the winners will be the companies that have begun to use modern technology and data driven modeling to create a strong operations department that drives consistent margins. There are dozens of practical ways where big data analytics can create immediate competitive advantages, but industry executives have been skeptical about and slow to adopt technology solutions that other industries are already embracing, and which could be the difference between profitability and bankruptcy. Maritime is still in the dark ages of computing and needs to embrace the latest, nontraditional solutions to survive.”

Olaf Merk, Shipping TodayOrganisation for Economic Co-operation and Development (OECD) @o_merk

“What can save shipping is a really strong ambition to provide more value to clients. Shipping is surprisingly self-oriented: too much energy is lost on who is the biggest, the strongest and the cheapest. There is little effort to understand what customers actually want and what shipping could do to make supply chains as smooth and frictionless as possible. The shipping companies with the happiest clients will be saved.”

Basil Karatzas, CEO, Karatzas Marine Advisors  @BasilKaratzas

“When one sees state-favored major shipping companies like Hanjin Shipping defaulting, the conclusion cannot be any clearer that the industry is in a hard spot; and, this conclusion is true for all market segments: dry bulk, tankers, containership and offshore. Further, what’s more concerning is that the market is at extreme points (think variance and volatility in statistics) and at such extreme points financial modeling and correlations do not behave in the same predictable manner as when the market is under the central part of the bell curve.”

“There have been concerns that the shipping market has been facing a structural change, in which case investing in shipping will be detrimental to one’s financial success. However, most market observers believe that the market is just in a seasonal shift, and patience and a disciplined approach (no additional new buildings and scrapping) will eventually bring the market to a balanced state. And, then there are the optimists who believe that tonnage demand and trade will surprise to the upside and will drive the market much higher than current expectations.”

“One thing is for sure, shipping remains a high volatility industry with plenty of opportunities for money to be made. Unfortunately, there are even more opportunities for money to be lost in the short term by following conventional thinking.”

Dimitris Morochartzis, Trade Consultant, Container Trades Statistics Ltd @D_Morochartzis

“The One-Belt One Road (OBOR) Chinese initiative presents a huge opportunity to re-shape global geopolitics and kick start a renewed process of greater regional and economic collaboration. At its heart, it envisages a comprehensive network of roads, railways, air and sea trade links, that has the potential to provide the greatest intercontinental cooperation between China and Europe and encourage the development of new markets in Central Asia and East Africa. If the concept is delivered successfully, it will be a game changer for the shipping industry, as it has the potential to facilitate significantly economic and trade growth across Asia, Europe and Africa by connecting the Pacific and Indian oceans with the Mediterranean and by leading to a more inclusive East-West integration by closing gaps between coastal and inland areas. The countries along the land and sea routes on the Silk Road account for 63% of the world’s population and 29% of global GDP and it has been estimated that over the coming decade OBOR will create $2.5 trillion in trade among 65 countries, therefore the business opportunities for the shipping industry are enormous.”

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