Has it ever been harder for shipowners to know what assets to buy? Splash seeks out some investment advice.
With the unclear regulatory framework shipping faces arguably there has never been a more tricky time for shipowners to future-proof their investments.
As part of Splash’s special maritime tech preview we asked a host of experts for their advice on how shipping can invest more confidently.
“The biggest push will continue coming from decarbonisation,” argues Splash columnist Kris Kosmala, suggesting more strict controls are set to be rolled out.
“Investing just to get by is not a smart decision in my opinion, as later retrofits and workaround will always be more expensive,” Kosmala warns.
Nick Chubb, founder of UK-based consultancy, agrees, telling Splash: “We are still at the early days of this, but the tightening of environmental regulations is not going to slow down.”
The days of a 30-year lifecycle for a ship and all of its equipment are numbered
Chubb reckons shipping will move towards a much more modular approach to vessel design and construction, a point of view shared by Michel van Roozendaal, the president of ship equipment manufacturer, MacGregor.
“Whilst ships will continue to become technologically advanced, there is a need for greater standardisation around optimised designs and longer build series for the benefits of new technologies to be fully realised,” maintains van Roozendaal.
Quite so, concurs Thetius’s Chubb. “The days of a 30-year lifecycle for a ship and all of its equipment are numbered. Though the hull itself may last that long, equipment and machinery will need to evolve ever-more quickly, with modules swapped in and out as technology and environmental standards progress,” Chubb reckons.
Fuel choice confusion
Shipowners are rightly reticent to order new ships today as they are unsure what will be the dominant fuel of the future.
“As direct electrification is expected to be viable only in the shortsea segment and few low- and zero-carbon fuel alternatives are available and practical today, maritime investment is right now a hard to guess bet,” says Caroline Huot, senior vice president of shipmanagement at Delta Shipping Corp.
A high share of natural gas, ammonia, and other low- and zero-carbon fuels will be in place by 2050, Huot predicts, but until then the transition will be a complex matter considering new vessels’ lifespan and the choice of engine design to be made.
“Who would want to invest in a vessel obsolete five to 10 years after its delivery? Likewise what is the cost efficient solution for at least 65 % of the worldwide fleet which is too young to scrap and too costly to retrofit?” muses Huot, touching on discussions that are ongoing at countless shipowner boardrooms right now.
For this year – as already evidenced in the few yard contracts reported by Splash – dual fuel ships remain the order of the day – shipping’s way of hedging its bets.
As with all bets in shipping though, there will be winners, something not lost on Alfonso Castillero, the COO at the Liberian Registry.
Difficult times are when the shipping investors really make their money
“With the level of existing uncertainty and blending the geopolitical situation, the pandemic, changing regulatory frameworks, it is extremely difficult to incentivise investments in shipping, especially on new tonnage,” Castillero concedes, before adding: “But difficult times are when the shipping investors really make their money. With an uncertain regulatory horizon for the long term, creative short-term solutions and strategies will be an important focus.”
Castillero’s mention of the pandemic and its long-term effect on shipping demand is something picked up by Manish Singh, the CEO of Ocean Technologies Group.
“2020 has re-shaped consumer behaviour and infrastructural activity. The tonne-mile demand impact on shipping won’t be evident in the immediate term,” Singh points out, something that adds an extra layer of complexity for CFOs making their capex plans for this year and beyond.
Data to aid decisions
Steen Lund, the new CEO at RightShip, is adamant that harnessing data properly is what shipping must do to ensure it makes the right investment decisions going forward.
“Part of the trend that we are seeing with data and digitalisation is a response and testament to just how hard it is to future-proof or be sure of any investment in the market at the moment,” says the former DNV GL executive.
Data is part of the solution, Lund argues, as it is effectively “an asset for business change”.
“It provides the framework for us to make real changes at all levels of the supply chain,” Lund suggests.
For example, using data, Lund points out financiers can invest in vessels that are sustainable and safe choices. Likewise, charterers can use data to incentivise better standards in charter party agreements.
Investment advice
To gain the best effect of shipping technology investments there needs to be a holistic view of the goals and targets, urges Morten Lind-Olsen, the CEO of Dualog.
Normally shipping companies compete in a silo-oriented world, Lind-Olsen points out, and in that perspective it is hard to future-proof investments. In each silo the tech investments more than anything appear like an added cost.
“There needs to be some joint community understanding of how to share the responsibility to cover the cost of common benefits and advantages,” Lind-Olsen advises, adding: “The IMO and other bodies are introducing new requirements and regulations on cyber security and environmental compliances that will enforce collaboration and investments, so that helps.”
The longer term threat from potentially disruptive moves from the likes of Amazon and other supply chain players ought to encourage shipping to invest in technology and new ways of working, the Norwegian reckons.
Concluding Su Yin Anand, co-founder of The Captain’s Table, a maritime start-up pitch competition, has some wise words for befuddled owners trying to work out how best to spend their money.
“My view is that one future proofs shipping investments the same way you future proof all business,” Anand says. “Keep cash flow positive, own and maintain good assets, and gain access to cheap debt. Investments that are not cash flow positive, can’t access cheap debt, and own poor assets, will either have to restructure, or find a buyer, or maybe a bit of both. Unfortunately, technology does not provide any solutions for a poorly run business. That relies on humans with the right values and talent.”
Probably better to invest in something more visible like real estate imo