Profitability could change shipping mindset

Malcolm Latarche
Malcolm Latarche

23 September 2016


Two weeks after SMM where several companies presented their visions of the future, consensus on what the future may bring is missing in almost every forum or get together of shipping personnel wherever it may be held. There is however, one view that is put above all others and that is profitability and not market share should be a driving factor for owners, suppliers and everyone else connected with the shipping industry. It is a fact that many profitable companies have failed as a consequence of outgrowing their particular market niche or attempting to defend against perceived threats from new players in their field. The problem with chasing growth in shipowning is that even if a company fails it impacts negatively on every other owner as long as the ships it commissioned remain in circulation. Hanjin’s failure and the fact that for the time being its ships are not in a position to compete is a brief fillip to other operators but not one that will last forever. If profitability is to become the new paradigm for shipping it will mean some big changes. Firstly the overcapacity needs to be removed and in the absence of a sudden spurt in trade that means increased scrapping which in turn could herald a change in attitude and the end of a long-standing model. To achieve the required capacity cut, ships much younger than the average 25 years will need to be cut up. In itself that is not necessarily a problem but if it becomes accepted wisdom that the life time of a ship should be reduced to 15 years or so instead of 25 years, will owners think twice about the levels of investment in new ships and settle for less robust and less safe vessels to compensate? On the other hand perhaps the biggest impact of a consistently younger fleet is that the end-of-life ships will no longer be available to operators of dubious quality. A shorter lifespan for ships will allow regulations demanding new technology and equipment to be brought into effect much quicker which may or may not be a good thing given the issues with ballast treatment systems.