YEAR 2016 THE YEAR THAT WENT BY FOR GLOBAL SHIPPING

YEAR 2016

THE YEAR THAT WENT BY FOR GLOBAL SHIPPING INDUSTRY

After the recent collapse of South Korean company Hanjin Shipping, unease surrounds the fate of the global shipping industry which carries 90% of the world’s goods and is vital for global trade and economic prosperity, yet there are too many signs pointing to the industry’s decline.

Several nations rely on shipping to import and export almost all goods and products. Downturns  in the global shipping environment will cause a hike in living costs.

-> Lesser players? Good news for Shipping Lines..Not so good for customers!

The Global Shippers Forum, a trade association for shippers, warns that less competition between lines will increase shipping rates. This could drive up the price of imported goods on shelves and make exports less competitive in the global market for many countries.

-> Hanjin goes bankrupt! More to follow the Hanjin way?

After the demise of Hanjin and the massive disruption caused to the global supply chain, there are rumours that more shipping companies are in trouble. 

Ratings agency Fitch is expecting more defaults among shipping lines, with very few assets easily convertible to cash and limited access to bank funding.

-> Slowing world GDP growth & Overcapacity... & scrapping new ships

A number of factors have led to uncertainty in the industry. A slowing of world GDP growth has resulted in less containerised goods being transported around the globe, causing an oversupply of ships and downward pressure on freight rates.

In an effort to minimise costs, shipping lines are building larger and more efficient container ships, aggravating the oversupply issue.

Severe Overcapacity is one of the driving forces behind the liner shipping co.s' troubles, and managing capacity, which worldwide will break the 20-million-TEU barrier in a matter of months, would be at the center of an industry recovery.

As demand is not expected to grow at a pace needed to match the capacity of new ships entering the fleet, extensive idling of the modern and efficient ships in the fleet, and continued demolition of the inefficient ships will improve the market both in the short- and mid-term. 
For the longer-term management of capacity, a low level of contracting for newbuildings must be maintained.

Scrapping – Unsafe Ship breaking @ the cost of human lives?  Issue remains unaddressed

On 4 December, worker Shah Jahan was killed on the spot at Arefin shipbreaking yard in Chittagong, Bangladesh, where German container ship “Viktoria Wulff” (IMO 9252101) is currently being dismantled on the beach. The 35-year old man, who was made to work without any safety measures, was struck on the head by a heavy iron piece.

German ship owner Wulff went bankrupt in August and the insolvency administrator is currently selling off the company’s remaining vessels. The “Viktoria Wulff” became the youngest container ship to be sold for demolition at an age of only 10 years without a previous accident.

“The story of the ‘Viktoria Wulff’ is characteristic for the failed business practices of German KG ship owners as well as ship funds. Nearly 600 ships have been sold due to insolvencies and financial problems since 2008, many of which ended up on the South Asian beaches. The bill for the ship owners’ and investors’ greed for profit is paid by workers and the environment in destinations like Bangladesh, where ships end up without any consideration of the human and environmental costs”, says Patrizia Heidegger, Executive Director of the NGO Shipbreaking Platform. “It is a scandal that German liquidators, who are appointed by the courts, sell end-of-life ships to substandard breaking yards risking peoples’ lives through deals that are in clear breach of international and even domestic Bangladeshi law just to sort out the books for German ship owners”.  Going forward, the shipbreaking yards have to be moved away from the muddy beaches to clean and safe ship recycling facilities using quays and docks where cranes can be operated to safely move cut steel sections. Otherwise, the death count of beaching will not come to a halt.

-> How Lines have started Fighting back against slowing growth

Mergers & Acquisitions, Alliances, Sell-offs: One response to the slowing of global growth and oversupply of ships has been to MERGE shipping companies. For example: CMA-CGM has acquired APL. Hamburg Süd, a large German shipping company established 140 years ago, has just been sold to Maersk Line, the largest shipping line in the world. So is the J3 – merger of Japanese lines in response to the COSCO-CS merger and strong 2M alliance of MAERSK & MSC.

Ship cos Go HIGH TECH with Unmanned ships & Automated terminals: Faced with reduced margins, the industry has looked into introducing worker automation to reduce labour costs. Driverless trains already haul hundreds of thousands of tonnes of iron ore in Australia. Fully or semi-automated container terminals, where driverless equipment loads containers onto vessels, are becoming more common.

Rolls-Royce Marine, in conjunction with a number of Northern European universities, is researching unmanned ships, which will move around the globe monitored from central control rooms. Japanese shipping company Mitsui OSK is forming a “Smart Shipping Office”, which will develop technologies for safer ship operation, with the ultimate goal of autonomous sailing.

Shipping companies go HI TECH

Autonomy is largely being seen as the next big disruptor in the maritime world. 
Worldwide, the number and scope of projects dedicated to unmanned vessels is increasing, including the world’s first designated test area for autonomous ships and European Union-funded research.

->  Developments in Shipping are affecting Countries ! 
How Countries around the world are implementing policies to protect their supply chains and shipping industries?

China has become a prime example, protecting its global supply chains by reinvigorating the old “Silk Road” overland route and establishing a maritime equivalent.

The USA, another major global player, also plans to establish more protectionist trade policies. President-elect Donald Trump has declared he will renegotiate trade agreements and review US coastal shipping policies.

Countries with heavy reliance on shipping, need to follow these countries’ footsteps and act now to ensure foreign shipping interests do not hold them to ransom.