Some predictions for the year ahead from Helix PR’s Ed Ion.
As communicators working in the maritime industries our clients often ask us how they can stay ahead of competitors and be the first to pick up on future trends.
Predicting future events and then planning for them is an essential part of our work as communications advisors.
But crystal ball gazing at the start of a new year is always fraught with danger.
Some clever soul will hoard your predictions away and then point out how wrong you have been come December.
But as we at Helix PR are feeling quite bullish about 2019 and won’t mind the embarrassment of getting it totally wrong by year end, we thought we would make some (fairly safe?) predictions at the start of this new year.
With some confidence we predict that shipping faces another challenging 12 months for three main reasons.
First the supply and demand imbalance (ie: too many vessels chasing too few cargoes) is set to continue as it has done for the past decade.
Until China decides to take genuinely strong, centralised action to curb the exuberance of its regional yards backed by domestic banks, this element of speculative ordering will continue.
Chinese yards and those in Korea and Japan are likely to enjoy relatively successful times as the IMO 2020 sulphur emissions deadline approaches and there will be opportunities for both 2020 compliant ‘scrubber ready’ vessels and retrofitting opportunities.
So another year in which too many ships will be ordered but a good one for yards still able to ignore the fundamental dysfunctionality of the market.
Second, the bubbling trade dispute between China and the USA is likely to continue for the early part of this year before it stabilises as both sides realise just how destructive all-out war would be domestically as well as the negative impact on the global economy.
Markets dislike uncertainty and this is likely to be a brake on global economic growth with its obvious knock-on effect on shipping.
A third challenge for the industry this year will be the realisation that it faces ever increasing amounts of regulation and scrutiny of its corporate behaviour.
Never mind the IMO 2020 sulphur cap, just as important, after September 2019, is that all ships must meet the D2 standard for ballast water discharges.
For most vessels, this means installing a ballast water management system. January 2020 also marks the entry into force of a raft of amendments to the International Convention for the Safety of Life at Sea (SOLAS), adopted by the IMO’s Maritime Safety Committee in 2016, 2017 and 2018.
The regulatory regime will become increasingly onerous and many smaller owners will no longer be able to cope.
This third point produces another prediction – that shipping will see a flurry of mergers and acquisitions (M&A) in 2019; perhaps more than at any time in the past decade.
The end of 2018 saw the M&A between Singapore-based BW Tankers and Hafnia Tankers which was heralded by some as a precursor for similar deals in the tanker sector.
It is significant that both operators had already been active in M&A in the products market before their tie up which has produced some much-needed consolidation in that crowded sector.
And as Anglo Eastern CEO Bjorn Hojgaard said at the end of last year, there is also tremendous scope for M&A within the management sector and we agree.
This is because so much of the regulatory burden on shipping now falls on the managers’ shoulders.
We predict that 2019 will see the leading managers transform themselves more than ever into advisory firms, offering commercially advantageous advice to their clients across a range of regulatory and related issues.
But because shipmanagement remains so fragmented as a business with most managers handling between 15 and 30 vessels, the quality advice, which in turn produces superior commercial performance, is not always available.
So expect to see a raft of small to mid-sized ship management company mergers in the next 12 months.
Our last prediction is perhaps a little cheeky, but we are reasonably confident about it.
The best owners and managers in shipping, and indeed the quality service providers to the industry (including class socs, P&I Clubs, flags, IT service providers, law firms, etc) will become increasingly conscious of brand and profile and the need to communicate with their client bases in new and innovative ways.