Rolands Petersons (Latvia), CEO of Norman Logistics GmbH:
"Shipping is the life bringing blood of global economy. Export and import in the international shipping industry constitutes approximately 90% of global trade shipping.
Ships are assets of high value, and the activities of trade ships envisaged annual calculation of income exceeding one and a half trillion US dollars in the rates of cargo shipping.
In the international market there are more than 50,000 trade ships carrying any types of cargo. The world's fleet is registered in more than 150 countries, and it is employed by more than a million seamen. Sea trade continues to expand providing benefit for consumers all over the world thanks to the competitive cargo costs. The increasing shipping as a transport efficiency still has great industrial perspectives in the future.
Shipping companies are very conservative; therefore any changes take place slowly. The conservatism of the industry has partially emerged as a result of the long history of growth.
Main Present Problems of the Cargo Shipping Industry
However, although the above mentioned sounds as a powerful breakthrough in the shipping industry, in reality container shipping has faced certain decline during the last five years, which was stimulated by about to happen global financial crisis, as well as by incommensurately high increase of industrial capacity with immediate falls. This economic disbalance rocks the shipping business alike over the waves in the sea – up and down.
Market is saturated, and the industry now competes for a market share. It means that the industry players shall be ready for both new challenges and changes, as well as for the fact the smaller and less competitive players will leave the market.
Many shipping companies have no well-considered system for the management of cash flow. Most of the operators offer the same or similar service to all customers, irrespective of the needs.
Many operators have conflicts with the owners of their administrated ships. The operators have their own understanding of the shipping industry and gaining of profit, whereas owners want to manage maximum value of their assets. Some of the challenges with which the companies face ― disbalance of supply/demand and fluctuations of demand.
Thanks to the redemptions of companies, new alliances and even bankruptcies, the operators' competitiveness in the industry decreases.
What is Expected with regard the Cargo Shipping Industry after a Year?
Essential are the tariffs that increase in the shipping industry under the influence of US and China trade war. If the countries will not achieve an agreement on the tariff rates, US will again reconsider and increase the shipping tariffs next spring.
Industry players are considerably worried about the impact of the implementation of the demand of International Maritime Organization to decrease the content of sulphur in the fuel already starting from 2020. The above mentioned regulations might have one more destructive impact on the industry.
Although operators do their best to preserve their gains in the shipping rates, the achievement of profitability during the coming years still will be complex. One or several operators still may choose to lower the rates and charges for other, thus implementing an intention to win out or obtain competitors who fight for the beginning of 2020, when there are planned the new requirements regarding fuel.
In the study "Is the Shipping Industry Embracing the Digital Age?" performed by international law firm Reed Smith it is pointed out that the most important challenges of coming five-year period are squaring of demand, consolidation of industry that makes to decrease the rates of cargo shipping and regulations with regard the fuel emissions to me implemented. The market surplus risk will affect the shipping rates and, possibly, will exclude smaller shipping companies. The survey showed that during the coming five years the directing force of most significant changes is the analysis of large data, as well as technologies to deal with environmental and emission issues.
Solutions how to Strengthen the Cargo Shipping Industry
In order to make progress, there shall be facilitated the improvement of commercial activities and strategic planning.
It may be also the analysis of a successful commercial operator's success story that might help other operators to understand, which customers gain the most profit. For example, as one global container line uses the market information to develop its business model. On the basis of this analysis, the company can develop purposeful sales campaigns in order to keep or attract more contributing customers. The balancing of prices in the industry will help to define marginal charges and price caps to fill up the ship and to use its maximum capacity.
The conclusion of contract shall be flexible in order the operator ships would not be filled with low profit cargos that finally constitute the company's annual budget.
A container with the lowest purchasing price often costs most. This may be dealt with by elaborating the price forecast of dry containers and by carrying out the optimal management of cargo container fleet that will enable to optimize active use.
It is necessary to understand, whether the lease of ships is always the best solution – perhaps, it is worth to consider the leasing opportunities. The shipping lines shall also choose whether to deliver cargos directly, or to perform reloading at a temporary centre, which may depend on several factors, for example, the size of the ship and the distance.
Employees working in the industry shall be motivated and provided with training. There shall be envisaged also investments into the company's data analysis.
Irrespective of the fact, how operators achieve cleaner level of fuel, they shall figure out, how to meet the requirements International Maritime Organization on the maximum permissible sulphur content in the fuel, decreasing it gradually."
Rolands Petersons (Latvia) is CEO of Norman Logistics GmbH (Germany). As an entrepreneur, he studies the situation and keeps track of the tendencies of global economy, as an expert of economy, he has his point of view and standpoint regarding industrial problems of global economy.
About the company:
Norman Logistics GmbH is based in Germany marine cargo broker. The company ensures guaranteed and predictable income for companies of ship owners, as well as maritime cargo transport service for the EU manufacturers and trade companies.