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Where to from here for Asian ship management?

Where to from here for Asian ship management?
  With Sea Asia 2015 now a distant, and blurry, memory, it is worth reflecting on the future of the ship management business in Asia. The shipping industry's navel-gazing has continued along a well-worn path. The cyclical nature of the shipping sector means there are both good times and bad—and right now rates are low for the dry bulk fleet, excess capacity is punishing owners, finance is hard to find, and  bunker prices are...well....who can tell? I will not even try to go there.

Smaller margins come with great expectations



Shipmanagement is, and always has been, an economies of scale game. The financial squeeze is on across the shipping sector. Owners are demanding much lower per vessel daily opex, greater price certainty, and better protection of their assets. Jobs which are unachievable inhouse are now routinely expected of third party managers. These cost saving, high-quality, expectations are increasingly causing friction between managers and owners.

Ship managers rely on volume to make profits, but this also causes stress between managers and clients as owners want a greater slice of the pie for being part of a larger fleet. Ultimately, and unfortunately, this is going to damage the reputation of the shipmanagement sector. As more of the global fleet becomes Asia-managed (due to, generally, lower costs), we may very well see a two tier offering develop: a "mass-market" service for some vessel types, and a high-end market for owners who are prepared to partner with their managers. In the future this may become more clearly defined.

Like in every industry, service standards, performance, and commercial ethics differ between providers. Greater transparency is often needed as to where money is made and where savings can be passed on. But the commercial reality of the situation is that shipmanagers do need to make a profit to invest in new processes and retain the quality manpower and stay in business. A management agreement with a partner who is sharing your losses is not going to end well for either their business or your vessels.

The knock-on effect of regulation

Like it or not, the increasing costs of regulation are here to stay. These costs - in the form of cold hard cash, time, legal fees, and manpower requirements - gradually find their way down the food chain.

Other industries and professions, notably the tech and financial services sectors, have already seen changes in the form of unilateral regulation having much wider cross-border compliance implications (for example in the cyber security, cross-border data-flow, and differing national interpretations of international treaties).  Ship managers will need to be far more flexible and able to take advantage of different regulatory structures to minimize the potential costs. However, this flexibility will also require funding.

As the various forms of regulation become entrenched, ship mangers will have to place far more attention on this part of the business. For owners, outsourcing compliance takes a huge weight off an administrative function, but for managers this will add yet another layer of cost.

We cannot forget the burden that paper work puts on our front line teams: seafarers. Complying with important regulations on board must be achieved within MLC guidelines, and without reducing safety vigilance. 

It is imperative; however, that safety regulation, standards, and on board practice are not compromised because of increasing costs. The shipping industry, first and foremost, must look after those at sea.

Investment in manpower and promotion

The at-sea manpower shortage facing us all is in dire need of addressing at an industry-wide level. The issues are numerous, but effective solutions seem to be in short supply. A few individual countries are taking action, and many managers and owners are doing their best to promote maritime careers. However, a piecemeal approach can only have a limited impact.

As an industry we need to address these issues, raise the image of a maritime career and ask hard questions around what needs to be done and how this is going to be funded. Increasingly new entrants to the workforce do not see the maritime sector as a viable career, and this is especially the case with the brightest and the best. We need to show potential employees a clear career path, one that encourages some onboard experience but also provides a prosperous future in the onshore business.

A place at the table

The size of the third party managed fleet is growing at an extraordinary rate. This trend is likely to continue as owners look for ways to manage costs and reduce operational expenditure. In addition, with increasingly lower margins, managers themselves are now being squeezed out of the market. The shipmanagement   sector is ripe for consolidation. It is feasible that we will see the ship management business develop into a handful of global goliaths (with thousands of vessels on their books), backed up by a number of specialist  providers. The analogy of the auditing/accounting service industry may not be a bad one.

With shipmanagers now able to quote managed vessel numbers in the hundreds, or even thousands, it is  time for our industry to come of age. Shipmanagement needs to have a strong voice and a place at the decision-making table.  As the fleet moves towards Asia, local owners, managers, and employees will have a far greater influence on the shape of shipping in the future.

 

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