Challenges ahead: The issues facing by shipping industry

Since the very beginning of shipping wherein the ships as single logs used for territorial transport of cargo to medieval ‘ Qaribs’ and finally to present day cargo ships, the evolution of shipping industry has come a long way but that was possible as the one constant i.e.”demand” for tonnage was always there irrespective of the time and continent as inter continent ‘trade’ was growing and demand for more and more tonnage resulted in evolution of shipping industry , which we have today.
However, this is no more a scenario now and as of today, there are challenges facing the shipping industry’s in next decade.

Few of the major challenges which may impact the shipping industry are as follows:

a. Stringent regulation pertaining to Fuel Emission
b. Flattening demand growth
c. Merger and acquisitions resulting in consolidation in shipping Industry
d. Operational challenges-Cyber security risk

a. Fuel emission related stringent regulations: With IMO2020, which forces the companies to change to compliant fuel or retrofit scrubbers, both resulted in significant operational challenges. For the companies, which planned to go with installation of scrubbers technology, are exposed to huge capital expenditure. As most of the vessels are procured on LOC( letter of credit), the additional capital expenses for scrubber would lead the owners to higher financial burden and would further increase the down time to reach breakeven.
b. Flattening demand growth: With world economy slowing down and same further hit by COVID-19,resulted in sharp downward dive of global economy.This downward trend not only flattened the demand in shipping sector but in turn will affect the freight rates and potentially wipe out the smaller shipping companies.
c. Merger and acquisitions resulting in consolidation in shipping Industry : Merger and acquisitions in shipping sector ( Hafnia Tankers & BW Tankers) has caused consolidation in shipping Industry, with large players dominating the market with larger volume and in turn reduced freight and charter rates across both dry and wet cargo sectors.
d. Operational Challenges-Cyber security risk: The cyber risk and subsequent data theft has affected shipping sector in recent years. The most recently high profile incidents involving COSCO and ports like San Diego has led the sector to have deeper look at cybersecurity.
However, increase in automation and advance technologies will increase expose to cyber crimes and same would be a challenge that shipping sector need to be updated and prepared in coming years.

Hopefully this year, we should start to see people being integrated and look for comprehensive solution to address the upcoming threat to shipping industry.