On Wednesday January 10th, DABS hosted a Shipping Outlook event to debate what’s in store for the industry in 2018. The evening’s two key speakers were Esben Poulsson, President of Singapore Shipping Association, and Rene Piil Pedersen, Managing Director at A.P. Moller Singapore.
The top of the Danish shipping community in Singapore gathered at Maersk offices on Wednesday night to talk about what challenges the industry is facing in the nearest future. First, Poulsson spoke about the various changes in store, aimed at making a more sustainable industry. Afterwards, Piil argued that a more fundamental shift towards digitalization of the industry soon will be reality.
Regulating today to secure tomorrow
When it comes to regulation, today’s agenda for the shipping industry revolves a lot around environmental sustainability, Esben Poulsson explained. On September 8th 2017, the IMO Ballast Water Management Convention 2004, entered into force. Taking 13 years to ratify, the Convention has been a good example of the challenges involved in 172 countries agreeing, and finally retifying by majority, an important issue.
With the newly ratified convention, a more robust and sustainable mandatory code for approval of ballast water management systems has also been implemented, in a more realistic time frame.
In January 2020, another IMO regulation will come in to force: a global limit for the sulphur content in the fuel used for ships of 0,5 percent m/m. This will be difficult to implement and faces challenges in enforcement, resulting in difficulties to maintain a level playing field. The uncertainty surrounding availability of low Sulphur fuel let alone the pricing, means that the potential for non-compliance is high. Meanwhile, Singapore for one is investing in LNG infrastructure, but Esben Poulsson is not convinced that LNG is the longer-term solution, and believes it is more likely that longer term, a completely carbon neutral form of marine fuel will be developed.
Right now, the IMO is developing a greenhouse gas strategy for shipping, and is aiming to have a road-map in place by the end of April 2018. Furthermore, Poulsson, the industry’s leading voice at the IMO, the International Chamber of Shipping, of which Poulsson is Chairman, has its own goals: namely to maintain the total CO2 emissions from the global sector below 2008 levels and in general, keep setting new ambitious targets for CO2 reduction by 2050.
Digitalization in the making
Rene Piil started pointing out how important regulation is in the shipping business, being that it is a very competitive one, and so it is essential that all players go by the same rules. However, change is inevitably going to happen and soon, he thinks.
“If we want to offer a better service for our customers, we need to change approach.”
In the future, we will see changes to the industry fundamentally, Piil believes.
Major eCommerce players have the potential to become competitors rather than just customers, Piil states, which means the industry is moving towards a new structure, and so we must be quick to adjust.
Comparing the transport and logistics industry to other industries – like banking, telecommunication and retail, it is not very digitalized. In principle, it should be as easy to book a container transport as it is to book an airline ticket on the internet. However, it still takes a lot of phone calls to make a shipping order happen today, which is not optimal.
Rene Piil is convinced digitalization is the answer. The key is to create a trustworthy internal system within the shipping environment which will eliminate the big amounts of phone calls and paper work, making trade more transparent and saving the industry a lot of time and a lot of money:
“The one who can create that system will create the future – and in Maersk we have that ambition by becoming the global integrator of container logistics,” says Rene Piil.
Innovation and competition
In the Q and A session the matter of blockchain continued. Because who is the most likely candidate to succeed in creating a more sufficient system? Is it someone within the business or will it be someone from the outside who will break the code?
The A.P. Moller Managing Director stated that it is no secret that Maersk has a great deal of ambition to crack that nut.
“We are very vocal about it. There are many stakeholders on board and we want to attract the best and most competent minds, so we have to be vocal about this ambition,” Piil said.
The SSA President added that there are a lot of organizations around the world working on this, so it is to some extent a ‘race’, although, he points out that smaller competitors do not have sufficient available to devote to these aims, as does a company like Maersk.
Furthermore, a question was asked about the future in export, seeing that the trend moves towards a higher demand for services rather than goods. Rene Piil confirmed that this is the way it goes – today you do not order a DVD for shipping, you stream it.
However, shipping is cheap and therefore there is a huge potential in the market of bulky goods, Piil explains. Why can’t people in Asia ship a new garden set directly from a manufacturer in Indonesia, rather than buying it from their local stores?
Maritime innovation is a challenge for bigger companies, which is where smaller companies and growth teams come in handy. Another question suggested that it would be more efficient if shipping companies teamed up and talked about the innovational strategy for the business altogether.
The idea is right, both Esben and Rene agreed. However, it would be difficult to achieve in practice because shipping is a very competitive business. Esben argued that this might be a possibility for smaller ship owners, but not the big ones.
Finally, what about Singapore? Will it continue as the number one maritime hub or will other ports surpass its top position?
Rene Piil Pedersen estimates a great future for Singapore and reasons that having hubs is the best way to organize. Esben Poulsson agrees, acknowledging that there will be competition from other maritime centers but that Singapore, being as innovative and efficient as it is, will likely continue to be the number 1 global maritime hub.