The Shipping Industry
The shipping industry is a service industry that serves the global economy. The global economy is undergoing a period of transformative change. Many of the dynamics that are working to move the tectonic plates of global demand are still in their infancy, but it seems clear that they are recalibrating the relationship between global economic growth and seaborne trade. The global economy is becoming less seaborne trade-intensive per dollar growth since the combined effects of ageing global consumers and emerging technologies (i.e. the fourth industrial revolution) are shifting the global economy towards services. Please see previous editions of this report for an extensive discussion of these topics. Few investments in ships have delivered a risk-adjusted return on invested capital over the past decade. New vessels have been ordered since most investors seemed to believe that the industry was at a cyclical low and on the brink of recovery. Today, most ship segments are burdened by surplus capacity, with more vessels on order, low freight rates and low secondhand prices. Dry Bulk (among a few other (sub) segments) seems to finally be recovering some of the lost territories. We are concerned, though, that much of the current demand picture simply reflects the short-term impact of political measures to stimulate domestic economic growth and job creation. We see a risk that demand volumes will shrink when the stimulus programs are scaled back and interest rates start rising again. Clearly, that would result in unprecedented overcapacity issues within the larger ship segment. The digital transformation of the shipping industry does not necessarily mean a sea change for every company in every part of the industry at the same time, although all ship segments are expected to be affected by digitalization at some point. Not all cargo types are equally obvious candidates for trading on a digital platform. The more standardized cargo types are set to be digitalized first. As trading platforms demonstrate their potential to cargo owners, more volumes will be included, thereby facilitating broader digital adoption even among the more traditional parts of the industry. It will be a gradual process, but even niche markets are likely to be impacted by these emerging trends since a digital platform will provide a benchmark for all cargo owners even before the lion’s share of a cargo type is handled digitally. Digitalization will result in greater transparency on prices and performance, and competition will ramp up. Freight rate volatility could be reduced over time, which is likely to spill over into less volatile pricing of secondhand vessels.