2021 was a faltering bounce back from 2020.... but it did allow many new ideas and approaches to be reviewed. The maritime connectivity and offshore energy sectors were forced to take stock and plan for leaner, more eco-friendly systems.
This has not yet been reflected widely in new orders. The UNCTAD Review of Maritime Transport 2021 suggests that while mandatory requirements such as ballast water treatment are included in all new-builds, modern eco-engines comprise just 25% of orders and energy-saving-systems comprise less than 15%.
Both the maritime sectors and the offshore energy sectors tend to be rather slow in adopting new measures. It is only when financial implications make change desirable that they truly adopt forward-thinking policies.
Various sectors of the industry such as the classification societies, insurance and ship building have yet to get in step and push the environmental agenda with more than warm words. The past five years have seen basic thoughts and designs being formulated. 2022 and subsequent years need to see the actualisation of these plans. After all, it’s not rocket surgery.
Mergers and Acquisitions
Marlink purchased ITC Global. They were then bought out by a private equity group led by Providence Equity Partners. Viasat purchased RigNet, then picked Inmarsat as another dance partner. We still believe consolidation is necessary in the maritime connectivity industry and we will likely see more occurring in the short-term. Pricing pressure is enormous and one of the key methods to reduce this is reducing competition.
Talking about pricing pressure, we are seeing less desire by notable players to win business at any cost. While playing rugby in Malaysia, I met an eccentric Londoner, Colonel Dick Bentham, who retired in Sarawak. He ran a tyre business in West London. Upon buying in to that business, the former owner gave him some sound business advice. «Dick...turnover is for vanity, profit for sanity...»
I think this adage is being heeded by more players in the market.
I was listening to the Vodafone Group UK’s annual financial review earlier this year. The CEO stated that the pandemic had propelled forward companies’ digitalisation plans forward by five years. A bold statement, hard to quantify but likely true. Digitalisation and value-added services are key components for maritime service providers and satellite operators. These solutions offer customers an increase in capabilities and a better understanding of their vessels. They also enable sellers achieve the goal of profitability in a tight-margin maritime connectivity market.
And concluding upon this point, we have seen an enormous amount of digital service seeding for operations, maintenance, and host of other services to commercial shipping, offshore, passenger, fishing etc. We are going to see some big wins from Inmarsat’s Fleet Data and KVH IoT Watch services next year.
The best way to predict the future is to create it. There have been some major challenges faced during the pandemic that should be addressed in 2022, such as the problems of crew change, and port congestion. The marine insurance industry has had a relatively light burden to carry despite headline catastrophes, but it too will change. Here are our top 10 predictions for the year ahead:
2022 Maritime Predictions
• Shipping Crew Systems will change...
Crews tend to want to work time-based schedules such as month on, month off or six months at sea, one- or two-months shore leave. Ports forbidding crew transfers during the pandemic rather damaged that system. New and inventive systems will have to be developed to ensure crew changes are possible. Various modules have been developed in on-board ship management systems that download datasets of piracy activity, changes to health (Covid) regulations, route planning etc. and are then able to optimise crew transfers. This is a trend that will become standard over the next few years. This means more connectivity and AI.
• Ports won’t be dumping grounds for storage...
Logistic companies have been using ports as cheap storage areas. Many factors contribute to this including shortage of hauliers but the backlog of containers and increased cargoes in the post-lockdown rebound have resulted in clogged ports. Many of these are considering introducing increased fees for long-dwell containers. AI will make these fines easier to police and will incentivise logistics companies to get their own businesses in order. This means more connectivity and AI.
• Forget Covid vaccine certificates, route optimisation into busy ports will become mandatory...
Schedule reliability has been a big problem over the last few years. It peaked at around 80% in the middle of 2019 and has been falling ever since. It is now languishing close to 35%. As discussed in previous blogs, port congestion is a big factor in this problem. The two main ports in California, Long Beach and Los Angeles, have extended the distance that inbound trans-pacific containerships are requested to avoid while awaiting a berth at the ports. This is now 150 miles from the coast — roughly 15 hours steaming. The benefit of this is that it increases safety by spacing ships out further out at sea as opposed to designated anchorages or tighter loitering areas within 40 miles (4 hours) from the ports. It also allows ships to adopt slow-steaming and reduce their carbon footprint. In much the same way as air traffic control can arrange flight arrivals and departures, ports need to be able to schedule shipping. It is expected that this type of operation will be adopted by other international ports. This means more connectivity and AI.
• Blockchain technology and maritime insurance are going to become well-acquainted...
distributed ledger technology (DLT), such as blockchain, will be heavily adopted by the maritime insurance industry. This will help streamline and ironclad multiparty arrangements and reduce overheads (by an estimated 40%) in the insuring office. This means more connectivity and AI.
• Digitalisation, IoT, ship operations...and what’s happening in my container?
Increasing adoption of the Internet of Things (IoT) will transform risk management of containers in transit, especially those needing to be stored at very specific temperatures (such as vaccines). The ability to monitor the cargo inside containers in real-time will not only reduce spoilage of time-sensitive products but also reduce the risk of fires. These have become an increasing claims trend on large containerships such as Maersk Honam, Yantian Express, and APL Vancouver where the very size of the vessel combined with the complexity of the fire control operation significantly increased salvage and General Average (GA) costs. This will be aided by better labelling conventions, assisted by DLT, to avoid an unknown concentration of containers carrying potentially flammable cargo. This means more connectivity and AI.
• Expect more offshore energy activity, particularly the gutsy one....
Offshore oil and gas production will stay relatively strong with more bespoke FPSOs being built as modifying VLCCs no longer provides the capacity needed. Inshore drilling will decline because of environmental pressures and wind and wave power will become the norm. This means more connectivity and AI.
• Two more big, vertical acquisitions...
We expect to see two more major acquisitions in the maritime connectivity market in the next 6 months and predict they will be vertical moves.
• Data analytics vendors next on the menu...
Probably not of the same gravitas, but we will see more partnerships with service providers and the smaller maritime data analytics players.
• Government intervention for Port Management...
We have spoken about port management, block chain technologies, and leaner just-in-time logistics. I think we will see a bigger involvement of accounting and technology consultancies in reviewing how shipping ports can be better run. This will be driven by government intervention.
• Digital shipping logbooks a must for shipping insurance...
Shipping insurance will demand full datasheet specs on vessel performance from charters and ship owners. Each vessel will need to be benchmarked against its peers, of similar age and class. In the UK, our car logbooks are called V5C. Perhaps another internet poll is needed to determine the shipping equivalent...
