ROUGH SEAS AHEAD FOR MARINE INDUSTRY BY KATIE SIEGEL
The sector’s profitability is precarious, but investments in technology and recruitment
could assuage some of its challenges.
The marine sector faced an uncertain and at imes unstable year in 2016. Regulatory uncertainty, fluctuating shipment volume,
tightening margins and changing
technology challenged the industry,
and will continue to do so into 2017.
But the convergence of trends
in technology, labor, and market
demands offer new opportunities as
well as new risks for marine operators.
Marsh, which has a global marine
practice spanning more than 100
countries, analyzed these trends in its
recent report, “The Changing Tide
of Risk: Expert Perspectives on the
New technologies are poised to
help modernize the marine industry.
Logistics is one area ripe for
a tech makeover. According to
Marsh, container logistics is a $4
trillion per year industry “rooted
in the byzantine world of legacy IT
systems, massive amounts of data-
entry type paperwork, and milestone
A Maersk study concluded that
about 30 individuals or organizations
touch the shipment of a product using
a shipping container – a process that
involves as many as 200 transactions.
Blockchain offers a way to
centralize data, documents and
transactions, reducing risk of error,
streamlining administrative processes,
Some ports are experimenting with
blockchain technology, but applications
remain in the proof-of-concept phase.
Autonomous shipping holds
promise as well. Marsh expects to see
fully autonomous ships at sea by the
end of 2020. Onboard technology
can monitor cargo conditions, alert
relevant parties to any issues, and
provide records of incidents.
3D printing has also been
tested by the Rotterdam Additive
Manufacturing Lab to make metal
castings. 3D printing can reduce the
time it takes to make a casting from
months to just weeks.
All of these technologies, however,
increase exposure to hacking, with
unknown impacts on business
operations or worker safety. Hackers
could break into connected systems
to steal corporate data, intentionally
damage cargo or ships, or interrupt
business with a DDOS attack.
The world fleet grew by 3 percent
in 2016, while shipments increased
by 2 percent. But an aging workforce,
lack of skilled laborers, and a lack of
interest in the marine industry from
young people mean shippers may
not be able to handle the growth.
According to the Marsh report, a
study by BIMCO and ICS found that
the marine industry could be short by
as many as 147,500 officers by 2025.
In its efforts to recruit more
workers, marine companies may
benefit by improving gender diversity.
Currently only 2 percent of seafarers
are women, and 98 percent of those
women work on cruise ships or in
some type of service capacity. The
Marsh report suggests that the
industry must revamp its image to
appeal to a broader pool of prospects.
International shippers will also
face pressure to reduce greenhouse
gas emissions. Global shipping is
responsible for 2.3 percent of the
world’s total emissions – down slightly
from 2.8 percent in 2007.
The International Maritime
Organization adopted standards to
improve efficiency and cut emissions
in 2011, and cargo shippers have since
been able to reduce their carbon
emissions even while shipment volume
But shippers are feeling the squeeze
to further cut their sulfur emissions
in addition to carbon. Significant
emissions reduction won’t be possible
without a viable alternative to fossil
fuel, the report stated. Even with the
ability to store energy in batteries,
ships will still need a backup form of
Uncertainty over environmental
regulations makes it difficult for ship
designers, owners and financiers to
plan the best ship design, and it is
unclear what incentives might be
introduced by new regulations that
affect operational decisions.
Other challenging trends include
cargo theft, which costs the U.S. about
$50 billion each year, and falling export
prices. The World Trade Monitor
index shows global export prices at
20. 5 percent below peak, Marsh said.
Falling prices are largely due to excess
capacity in heavily traded sectors and
stagnant export volume.
Though shipment volume increased
in 2016, industry researchers see the
trend as short-lived and uneven across
the globe. Prices and profit margins
should improve, however, as global
economic health continues to recover.
THE INSURANCE SECTOR
Overcapacity is also challenging
the market. More marine operators
are shifting risks to non-traditional
new entrants into the marketplace
over historical markets like London or
Paris, sometimes retaining more risk
themselves. Prolonged complacency
by underwriters “has done little to
focus attention on the quality of
tonnage being insured or the terms
being offered,” the report said.
Overall, the report warns that the
marine industry, including shippers,
ports and every member of the supply
chain, will face a difficult year ahead
if it does not rein in excess capacity. A
single Black Swan event could reveal
inadequate insurance coverage and
cause lasting damage to an industry
already fighting for profit margin.
It is imperative for the marine
sector to invest in attracting new
talent, and in adopting technologies
that can boost efficiency and help to
control costs. &
Falling prices, a labor shortage, and environmental concerns apply pressure to the
SUPPLY AND DEMAND SHOR TAGE
0 200,000 400,000 600,000 800,000 1,000,000
ESTIMATED GLOBAL SUPPLY AND DEMAND OF SEA OFFICERS FROM 2015 - 2025
SOURCE: BIMCO AND ICS
SUPPLY DEMAND SHORTAGE