Despite the fact that 90% of the goods traded around the world are transported by sea, all is not buoyant in the shipping industry. In spite of this figure, there is currently an overcapacity of ships within the industry. The result being that there is intense competition for the reduced demand in business and this is keeping the shipping prices low.
There are additional factors that further add financial pressure to ship operators. The world economy is still on a downturn with even the emerging markets in Asia suffering. The new ships which are being constructed and continue to enter into service are bigger than ever before, making them more cost effective. To meet the needs of these ships of increasing size, the Panama Canal is being expanded as are many of the port facilities around the world. Larger ships mean that fewer ships will be needed to transport the current demand of goods around the world.
This is occurring at the same time as there is a glut of crude oil supplies in various parts of the world which has even resulted in tankers being used as floating storage vessels. All the while the international community continues to push the maritime sector to become more environmentally friendly. This pressure for more regulations to reduce sulfur emissions has resulted in the EU and other countries introducing regulations for monitoring and reporting CO2 emissions from ships visiting their ports.
Those ships that sail in the North Sea, Baltic Sea and the English Channel for example, are expected to meet lower sulphur emission requirements than in many other parts of the world until such time as an international standard has been set and agreed. To meet these requirements low sulphur fuel rather than heavy fuel oil must be used by ships operating in these areas. The difference in the price between the two types of fuel is currently around $200 per ton.
While the larger ship operators may be able to weather the storm, for the smaller ship operators it means that they must find ways to reduce their operating costs to stay competitive.
Cutting operating costs can come in a variety of forms, most of which are detrimental to the raising of standards within the industry. Maintenance, training and the size of a ship’s crew are all areas that are invariable considered when looking to cut costs. The industry already finds it difficult to obtain enough qualified seafarers for the world’s fleet, and this problem is seen as a contributing factor for the number of accidents that occur within the industry. While a raft of regulations are being introduced to increase the safety standards of the industry, ship operators struggling to keep costs down will likely provide the bear minimum of training needed.
A lack of maintenance can result in a ship becoming less safe and less environmentally friendly. While this may be noticed when the ships are surveyed, struggling ship operators try to sidestep such problems, and to do this they may look to class and register their vessels with a less demanding classification society, flag administration, or both.
In a time when supply and demand are clearly at odds with each other within the maritime industry, it becomes even more important for those overseeing the industry to be extra vigilant. Registrars, classification societies and port authorities all need to work closely together to ensure that lower standards are not acceptable regardless of the state of the world’s economy. Fortunately, for those involved, technology and the ability to share information more easily should help to identify those operators who are unable, or not prepared to maintain the standards of their ships and the safety of the seafarers that work on them.