The future challenger for the shipping industry

Daniel Bosch Wood

Maritim Lawyer

LLM Southampton

Las Palmas de Gran Canaria

It has been almost a decade of struggle to stay afloat for the shipping industry. Acquisitions and mergers will have reduced to less than 15 large shipping lines by 2018 from their 20s a year ago as part of a strategy to mitigate the supply / demand imbalance and weak freight rates that barely cover operating costs.

Constant Change, Continuing Crisis is the name that the International Chamber of Shipping (ICS) has called this phenomenon in its most recent analysis that emerges from the entity’s Annual Report 2017, which highlights the importance of Its work to represent the interests of the industry before the governments in regulatory matters. “Legislators, however, do not seem to always fully understand the challenging economic conditions in which shipping companies currently operate. However, it is important to emphasize that there is no evidence of a decline in the quality and safety of vessel operations worldwide, which continue to be impressive, “the document reads, in order to highlight the complex scenario In which the industry operates.

The ICS envisions a 2017 complex for the industry. While trade by sea is expected to increase, it is likely to be overshadowed by the number of new vessels expected to enter the market – many of which have significant government support – with the result that there are still more boats chasing The same few

China to the rescue

Thanks to China’s “emerging economy” title, the shipping industry has a chance to survive. The Asian giant is committed to spending over $ 1.5 billion on infrastructure development around the world as part of its ‘One Belt, One Road’ initiative, motivated by high levels of demand from the country. However, in recent years, China’s GDP growth rate has declined from its 10% average since 1989, with 2016 the year with the lowest rate in nearly three decades of boom.

On the other hand, domestic consumption has become the ghost against which shipowners must fight, as the service industry begins to hog most of GDP growth – replacing what was previously driven by international trade and consumption Of commodities that drives manufacturing and infrastructure development.

Regulation and recycling

As environmental awareness takes its place in the industry, operating costs are rising as a result of the demands of reducing emissions, controlling ballast water and implementing energy efficiency technologies. For example, it is expected that the collective cost to industry of implementing the IMO Ballast Water Management Convention, which will come into effect in September 2017, is expected to exceed $ 100 billion per year.

Although the recycling of ships is ‘fashionable’, it is in close competition with new vessels thanks to the ‘offertones’ of shipyards that take advantage of the low prices of steel. The investment to recycle a container ship would not be short, since the modernization of technologies with more than two decades is expensive, but not to introduce additional tonnage to the industry the recovery could arrive sooner rather than later and restore the elusive supply-demand balance.