A look ahead - trends that will shape shipping in 2018

Economic upswing in growth gives rise to cautious optimism among top names within the shipping industry. Policy, regulations and digitalisation will continue to impact the industry in 2018.

The wheels of the global economy are spinning faster, demonstrated by the growing output across the board, reaching pre-crisis growth levels in some advanced economies, writes the Baltic and International Maritime Council (BIMCO) in its latest market analysis report.

The ongoing recovery is still in a ‘fragile state’, judges BIMCO, since demand has increased but so as supply in terms of the dry bulk market. This means only a slight fundamental market improvement according the association, which represents shipowner members that control around 65% of the world’s tonnage.

Cautious optimism

While the ongoing recovery is welcomed by many, the general consensus appears to be one of cautious optimism among some top names with the industry.

As reported in Asia Shipping Media Charles De Trenck, one of the world’s most famous shipping analysts, believes dry bulk has better prospects than containers or tankers in the months ahead.

“Containers will be held back somewhat by ship capacity, despite demand being a little better,” De Trenk maintains, adding: “Oil demand in general has been picking up but capacity still seems an issue.”

Dr Adam Kent from Maritime Strategies International (MSI) believes 2018 will see “modest” improvements in earnings for most sectors, but remains concerned about the looming prospect of a bumper round of orders at Asian shipyards.

“Although by the end of 2018 most shipping sectors will see earnings improve on their end 2017 equivalents gains will, in large, be modest,” Kent predicts.

Bjorn Hojgaard, CEO of Anglo-Eastern Univan Group, has some simple advice going into 2018. “Hope for the best but prepare for the worst,” says the shipmanager.

On a macro level, the big question for Hojgaard is whether the simultaneous economic upswing in US, Europe, China and to some extent Japan in the second half of 2017 is sustainable and will continue into 2018, or if one of the macro risks on the horizon might derail the growth and through that deflate the hopes for better rates in shipping in the year ahead.

Incoming legislation

Another factor to be aware of is the impact legislators could have on earnings, something MSI’s Kent is all to aware of, saying: “Policy and regulations will continue to shape the shipping markets in 2018, with the binary nature of decision makers able to dislocate market fundamentals and impact vessel profitability.”

Incoming legislation is something that Simon Doughty, CEO of Hong Kong’s Wallem Group, also picks out as a key thing for shipowners to be aware of in the coming months and years.

“There will be a number or regulations coming into force in the next couple of years – regarding key issues such as emissions, ship operations and pollution liability and we will need to prepare for these,” says Doughty and adds, “This means learning from best practices and adapting processes accordingly. It also means training to ensure that everyone involved, both on shore and at sea is well aware of both the latest requirements and their responsibilities in order to maintain a quality reliable service.”

Digital transformation

As the shipping industry undergoes change, a growing number of companies believe investments in new technologies, innovations and partnerships are key to achieving efficiencies and growth in 2018 and beyond.

A.P.Møller – Maersk, the Danish shipping and energy conglomerate, has been very active in the push for digitalisation of the shipping industry and new ways business is done. The market leader recently announced that it has set up a blockchain joint venture company with IBM.

“The opportunities are enormous,” says CEO Søren Skou, “but so is the possibility of disruption with the emergence of new competitors that were born digital. Our industry must develop new technology and software solutions in open, innovative communities. We need to digitize from the inside of our business, but at the same time, finding the best solutions will require our industry to partner with companies across a wide range of industries.”

Skou’s view is echoed by Thomas Wilhelmsen, CEO of the Wilhelmsen Group. Speaking at the recent DNB Industry conference in Oslo, Wilhelmsen said, “Our industry must change its traditional, conservative approach. Digitalisation offers great opportunities for efficiencies, growth and innovation. To succeed it is necessary to share knowledge and experiences between companies and industries, to create new ways of working and better customer interfaces and services.”

Kongsberg, one of the world’s leading high-tech companies, also has clear priorities to use the year ahead to help companies with their digital transformation. “Digitalization is one of the key focus areas in industry today, and it is changing the way companies work: it’s tearing down walls, changing business models, and it’s happening rapidly,” says Hege Skryseth, President of Kongsberg Digital. Recognised for developing new digital solutions and related technology alliances, Kongsberg predicts technologies such as Internet of Things, big data, automation and robotics will lead to significant changes for the industry.

More disruption

Predicting what’s likely to happen in the markets is never easy given the volatile nature of shipping. That said, it’s encouraging that some are seeing an underlying positive sentiment in some market segments, and there is hope that 2018 will see a return of market equilibrium.

In these uncertain times, one thing remains clear. We are likely to see more disruption and collaboration as companies sharpen their traditional skills with new high-tech edge to achieve greater efficiencies, market shares and sustainable operations.

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