Shipping’s five biggest changes

A shipping cycle downturn, the cost of fuel for ships, geopolitical change, the regulatory challenge and the information revolution are the five factors which will change shipping in the years to come,” Clarkson’s President for Research states.

Photo: Maersk Line

The shipping industry will face important changes in the world and the industry will have to adapt if it wants to survive. So says Martin Stopford, President for Research at Clarkson PLC, at the Copenhagen Blue Business & Shipping Conference 2013, taking place today.

The five major changes facing the industry include the shipping cycle downturn following the financial crisis which still affects shipping, the growing fuel prices which show no signs of lowering again and changes in the global demographic structure. Furthermore changes in the power structure between growth economies, developed countries and developing countries, new legislation and global regulation of the shipping industry and changes in how, how fast and how much the world, and thus the shipping companies, communicates are important to take into account.

The industry's basic conditions

Martin Stopford considers the shipping cycle downturn as a condition to which the carriers must relate. Not until 2014 will the number of deliveries improve and the pessimism still shows in the orderbooks which are at 17 percent of the world fleet which corresponds to the 2002 level.

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“The orderbooks are very small. Shipyards are under pressure and we will see more of it in the shape of price drops,” Martin Stopford says.

If the negative spiral is to be used to look positively at the industry, Stopford states that every carrier will have a significant focus in cost which will result in the small carriers leaving the market whereas the strong will be left.

Just as the industry players will have to get used to the industry being under pressure, they will have to get used to high fuel prices. These prices have come to stay meaning that both carriers and suppliers must adapt and begin developing new technology.

The price change is significant. One example of this is the fact that in 2005 it was twice as expensive to operate a ship as it was to buy the fuel for the same ship but today it is the other way around.

“It creates a lot of opportunities to adjust the technology and makes room for players able to provide the help needed by the carriers when making the right retrofit decisions,” says Martin Stopford, pointing to the fact that in future, we will see new demands for ships in the way that they will have to sail faster and slow steam depending in the price level of bunkers.

Increased globalisation

Other than the hardcore price increases and very hands-on changes in the shipping industry’s business opportunities, the industry will have to relate to the big changes going on in the world in general. Here, Martin Stopford especially sees the changes in the global demographic structure and the digital revolution on the communication arena as the most important ones.

“The geopolitical issue is not as influential as the change in fuel prices but it is clear that with an OECD population of 1.3 billion people and a non-OECD population of 6 billion people, we will see a lot more people from all over the world being involved in the shipping industry,” Martin Stopford says. In particular, he points to Brazil as a country which is developing its shipping and offshore sectors significantly.

Demand of transparency

Concerning communication and information technology, Martin Stopford thinks that carriers will need help to handle the increase in pressure caused by an open and increased level of communication.

The last change affecting the industry is the new and increased level of legislation.

“Carriers will depend much on the industry and the industry’s ability to tell people which opportunities they have to find new technical solutions to the demands we will see through e.g. the ballast water convention,” says Martin Stopford calling the development within shipping for a movement towards a “stateless industry” in which the regulation is international and shipping is not ¨tied up with nation states.

How to succeed?

If carriers are to succeed, Martin Stopford states that they will have to really acknowledge that the changes are not just something which will take place in future. The high prices are here to stay and the overcapacity will not just disappear.

“Adapting to change is necessary,” says Martin Stopford.

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