If the forecasts made at last week’s Lloyds List 2019 Outlook Forum are anything to go on, 2019 will offer something for everyone, depending on your disposition. Some serious challenges, some genuine causes for optimism, and some crystal-clear thinking on shipping’s short and long-term agenda.
Mark Williams, MD of Shipping Strategy, served up some stark warnings over the macro outlook for shipping, speaking of the threat of trade wars, Brexit, and a possible slowdown in emerging markets – all among the many challenges facing the industry which are ultimately political in nature, rather than being driven by global economic trends.
The sense that shipping is arriving at a crossroads was captured by Despina Panayiotou Theodosiou, CEO of Tototheo Maritime and President of WISTA International. She spoke of “regulation, digitalisation and diversity”, with each one posing a threat and offering an opportunity, depending on the approach that we take. In digitalisation, for example, those that remain in a state of denial over the impact of digital technology will see none of the upside. By contrast, those that embrace the possibilities and who engage in genuine collaboration – not just transactional relationships – will find new solutions and new efficiencies by employing fresh thinking from outside shipping’s traditional confines.
Building on this theme, Michael Parker, Global Industry Head for the Shipping, Logistics and Offshore Industries, Citigroup, argued that the shipping industry should have the confidence to accept the change that is coming and to respond positively and aggressively.
He also questioned the impact that digitalisation might have on market trends themselves. For example, it might be possible to use data tools to flatten out the peaks and troughs in the freight market. Good for some, but might it actually lower average vessel earnings over the course of the cycle?
Michael also put shipping in the context of the wider ESG (environmental, sustainability, governance) agenda that is already driving billions of dollars of investment. Roger Strevens, Vice President, Global Sustainability, Wallenius Wilhelmsen, spoke in similar terms of a grand convergence between the world of business and the world of sustainability.
This all feeds into a wider sense that the boundaries between shipping and other sectors – whether industrial or service sectors – is eroding. Michael Parker argued that shipping needs to respond to the wider integration of the transport supply chain, for ship owners to work together with the likes of Walmart and Amazon, for example, and to configure their businesses in a way that aligns with wider supply chain trends.
The boundaries may be eroding, but some stark differences still remain. As Roger Strevens put it, the volume of data delivered from a $100m ship – a noon report – compared with the data from a $100m land-based industrial facility shows the distance still to be travelled in order to reap the benefits of digitalisation. Roger went on to predict that we are entering an era of “3D disruption – difficult, disruptive and dear.”
When it comes to digital disruption of the unwanted kind, cyber-security is at the top of the list. Despina argued that more needs to be done to train sea staff and shore-based personnel on the risks, and that this must be addressed at board level as a corporate risk.
In a similar spirit, Capt. Rahul Khanna, Global Head of Marine Risk Consultingat Allianz, agreed that onboard cyber-risk remains under-estimated as a threat, despite a number of lower grade incidents. Particularly in light of the lack of a major loss to date, he described a cyber-incident that results in the loss of control of a ship as being “one of our worst nightmares.”
One of the big stories for 2019 will be the preparations for the 2020 fuel regulations and views on the panel were mixed over the role of scrubbers. Jörgen Strandberg, General Manager Advanced Technology, Wärtsilä Voyage Solutions, offered his insights on the decisions facing each owner on what is right for their fleet and business, as well as the intriguing notion of a scrubber installation at sea – technically possible in 72 hours on some vessels, under particular circumstances and with a lot of preparation. However, others were far less convinced that scrubbers have a long-term future beyond as a transitional solution for the early 2020s.
The session concluded with the big question of decarbonisation. From a regulatory perspective, there seemed to be a consensus that the IMO needed to remain in the driving seat on GHG regulations, but Mark Williams argued that to truly tackle the problem would require a “NASA level of R&D”. Roger Strevens recognised the feasibility of market-based mechanisms (MBMs) if they can help move shipping in the right direction, whilst Michael Parker suggested that the challenges of decarbonisation – energy storage and energy consumption – are not unique to shipping. As such, the industry should be open-minded to external expertise and fresh ideas.
Capt. Khanna summed up the feeling of many when he noted that shipping’s loss record is moving in the right direction. What’s more, it has the ability to tackle each of the challenges it faces, if we have the time to do so. The difficulty comes when these challenges arrive faster than our ability to respond, whether through regulatory responses, market forces, or technological innovations.
So, what will 2019 be? The year that the industry sees sense on over-ordering? The year that sees global growth crippled by trade wars? The year that in which shipping fully embrace the ESG agenda? The year of the first major shipping casualty from a cyber-attack? The year in which digitalisation becomes ‘the norm’? All of the above? Or something else that none of us have anticipated?
Here at BLUE, we’re looking forward to finding out and playing our part in helping to deliver the version of 2019 that we all hope for.