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CMA 2016 - Can 'smart shipping' fix a broken business model?

CMA 2016 - Can 'smart shipping' fix a broken business model?
Much of the talk at the Connecticut Maritime Association’s (CMA) annual conference last week could have been a reprise of the three-day event circa 1999 and 2000, when dotcoms were running wild. Fast forward to 2016, technology, connectivity, and the catch-all of “Big Data” formed a strong thread running throughout the three days.

Even the human resources area, the sourcing of “talent”, could do with some disruption, as was put by American Bureau of Shipping’s ceo, Chris Wiernicki, who provided one of several opening day keynote speeches. He suggested that shipping executives should be adept at identifying and embracing new and possibly “disruptive” technologies that will move businesses forward.

So what is different from 1999-2000? Mike Mitsock, from KVH, which harnesses “content” distributed to vessels through satellites, pointed to a new generation of Inmarsat satellites now being deployed- with much faster download and upload capabilities than traditional satellites. The ship can now truly be a link in a larger chain.

Clarskson Research non-executive president Martin Stopford talked about “Shipping’s Fourth Revolution”- a move to “Smart Shipping”, which entails, “Managing Transport, Not Shipping”. This move is supported by the wider communication “pipe” where the ship is a node in a broader network, but technology is a facilitator, not an end in itself.

According to Stopford, shipping’s business models changed between 1972 , prior to which it was a productive logistics business, and 1990, when “cargo owners walked away from the process of putting shipping capital on their balance sheets”. He asked rhetorically, “How can you build a business, when charterers and owners are at loggerheads?” At this point, according to Dr. Stopford, the business model for shipping, once an industrial node, is fundamentally broken.

Evidence supporting this assertion could be found throughout the three-day event, which saw shipping traditionalists struggling, in abject frustration, with overcapacity that has overwhelmed the business. Dry bulk was the subject of a gloomy outlook all around, with many of the discussions dwelling more on damage-control than on positive strides forward. Predictions for a dry bulk recovery extend outward to 2020, or beyond, in spite of 2015 and early 2016’s good scrapping pace.

The tanker market, though vastly improved over the past year and a half, is also likely to suffer from overbuilding, with Robert Bugbee of Scorpio Tankers saying, “it always does”.

Finance, also a perennial topic at CMA conferences, figures prominently in definitions of both problems and solutions. Denis Petropoulos, from Braemer, implored the business to look at “benchmarking” actual performance to improve efficiency- acknowledging that, presently, the real profitability of the business came from financial machinations. The post 1990 climate referred to by Stopford has supported “asset play” strategies, often by companies with public listings, and fueled by rounds of funding first from banks and, increasingly in post 2009, from “alternative capital providers”.

But Stopford, with this truly long term view, sees all the technologies discussed at the CMA as supporting a business that could take a step backward in a structural sense, where multinational giant companies, with cargo, rather than investors, would control the business.

Perhaps the best encapsulation of the entire conference could be attributed to shipowner Marc Saverys who defined success as simply having survived in the industry for many years over multiple cycles. And, yes, CMB has now recently been privatized, being delisted from the Euronext at the end of December, 2015.