Danish Maritime Days 2016

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Theanti-governmentrevoltthatcharacterised Brexitwasdrivenbyangeroverinequalityand immigration.Governmentsaroundtheworldhave respondedtoincreasinginternaltensionwith hundredsoftradebarriers,renewedprotectionism, andareductioninglobalflowsofcapitalthathascut economicgrowth.AsRuchirSharma,headofthe emergingmarketsequityteamatJPMorgan, explainedit,"Economicgrowthmayhavetotakea backseatwhilepoliticalleadersworktoaddressthe angerofthosewhobelievethatglobalisationhasleft thembehind."Welcometothe ageofdeglobalisation. Forshippingthisisanight- mare.Atatimewhenover- supplyofshipsneedseconomic expansiontoraisedemandfor capacity,theprospectof retrenchmentisthevery oppositeofwhatwehadbeen hopingfor.Capacityisslowly beingreducedbyacombinationofincreasedlevelsof scrappingandfewernewbuildingordersanddeliveries, butbothsidesofthedemand/supplyequationmustbe addressedifshippingistobecomeprofitableagain. Theobviouslosersintheshorttermarethose companies,largeandsmall,thatarecarryingdebt. Shipbuildersthathavetraditionallyuseddown- paymentsoncurrentorderstopaydebtsonearlier ordershavebelatedlydiscoveredtheinadvisabilityof suchabusinessmodel.Shipownersluredintoplacing ordersbytheeaseofsecuringfinanceandeasyterms frombuildershavestruggledtogenerateenough revenuefromcharterstocoveroperatingcosts,yetare underpressuretomakesomereturnforcreditors. The expectation from market analysts is that dry bulk should return to acceptable levels in 2018, tankers will come under freight rate pressure in 2017 as newbuildings are delivered, and container ships will continue to struggle unless there is significant removal of capacity in the coming year. However, all these forecasts were built on globalisation as the basis from which we work. If deglobalisation – with all its trade barriers, protectionism, and introspection – takes hold, all bets are off. Whatever the Bank of Japan believes, this is not about Brexit: it's likely to be our world for the short term. Elections in Italy, France, Germany, and the Netherlands over the next 12 months could make uncomfort- able reading for economists looking for hopeful prospects. Howshouldshipownersdeal withdeglobalisation?Theanswer tothatliesinanotherrealitynowgainingcredibility throughouttheindustry:thatthebusinessofshipping islessaboutshipsthanitisaboutpeople.Peoplewith skills,experience,andinsight;peoplewhounderstand commoditytradingandfinancialmarkets;peoplewho canlinkdataanalysis,satellitecommunications,shore controlcentresandnext-generationtechnology; peopleforwhomshipsareacriticalpartofan end-to-endlogisticsbusiness. Deglobalisationwillforcearevolutioninshipping becauseinefficiencieswillbeexposedandbadpractice punished.However,highly-leveragedcompaniesthat regardtheirshipsastheirequityshouldwakeupand smellthecoffee;virtualrealityjustgotreal. opportunities we haven't begun to imagine yet, but before that age arrives there are some significant obstacles to be overcome, the most obvious of which involves change to, or at least reinterpretation of, regulations. Building the technology is the easy bit; getting it to interact with legacy systems currently in service is a harder nut to crack. Perhaps the most unexpected obstacle shipping throws up is its very short deadlines. Unlike in the military domain, for example, designs can't run for a decade to ensure a stipulated level of fidelity is achieved. Commercial shipping, although it appears frustratingly slow to adopt technology, moves at breakneck speed in terms of seeking opportunities in the markets that it can exploit for profit. Merchant shipping is a complex animal, with sophisticated stakeholder networks, multinational and multicultural professional services, varied operating environments, and always the commercial imperative. The question shipping asks of those who offer their expertise is clear: "Will your product help me to make money?" This is the first criterion against which everything is judged, and it's the hurdle at which so many potential suitors fall. It is in aligning next-generation technology with the human element that shipping's tech partners will succeed or fail. There is little to be gained from investment in designs and technologies if they are not deployed correctly, which means in a way that can be implemented by non-technical people during daily operations. Commercial shipping is at a crossroads. It has failed to learn the lessons of the past and the result is an unbalanced industry that has evolved without regard for the needs of the customer. It has taken eight years for shipping to stop hoping for a rising economic tide to turn its fortunes. Now it's time for companies to invest in holistic solutions that combine technology and human resources. 'Will your product help me to make money?' Shutterstock Wayne0216 / Shutterstock.com Fairplay.IHS.com | October 2016 | 7 'The prospect of retrenchment is the very opposite of what we had been hoping for' FAIRPLAY Industry insight

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