Reasons for optimism after a tough year

Having been re-elected to continue serving you as President, kindly allow me to say thanks to the members of the CSA, the General Council, our affiliates and partners for your support and confidence.

I offer you best wishes and hopes for success in 2017 and I look forward to working with you throughout the year to steward the growth and development of our regional shipping industry.

As 2016 ended, many of us ruminated on what was a difficult business year. Demand trends, fierce competition and oversupply of tonnage were among the negative factors affecting the performance of the global shipping industry. We here in the Caribbean were not immune as the level of uncertainty about the future of our sector, and indeed the global economy, took its toll. That uncertainty, as we well know, is related to a variety of industry-specific issues as well as geopolitical factors ranging from the UK referendum on EU membership – so-called Brexit – to the comparative slowdown in the Chinese economy.

Our sector took serious body blows in 2016 characterized by super mergers and the bankruptcy of one global carrier. Container lines suffered from some of the worst conditions the industry has ever endured, largely because of the delivery of brand-new ultra-large vessels at a time when trade growth is low. The huge capacity supply and demand imbalances caused freight rates to drop to record levels and South Korea’s Hanjin Shipping Co to collapse in August.

Overcapacity
It seems almost a litany at this point, but it is clear that shipping is in for another hard 12 months, which may continue into ensuing years. In fact, the Boston Consulting Group Inc said in a recent report that the overcapacity that has plagued shipping firms in recent years would only grow wider in the coming years. They added that shipping capacity would outstrip demand by between 8.2 and 13.8 per cent in 2020 compared with a seven per cent gap today. This is a dire prediction which indicates that the current plunging freight rates and vanishing profits for marine carriers will only grow worse, particularly on major trade lanes across the Pacific and between Asia and Europe.

Aside from the economic stressors, we will be contending with external regulator changes. This year will require compliance with new regulations in much the same way that the industry grappled with the Verified Gross Mass Regulations of the International Maritime Organization last year. The Ballast Water Management Convention now stands on the cusp of ratification on 8 September this year and at a largely unquantifiable cost to operators. It will be instructive to see how shipping deals with the issue and how prepared we are. Nonetheless, despite the challenges currently facing the industry, toward the end of 2016 the Moore Stephens Shipping Confidence Survey indicated a sliver of optimism. Confidence among shipping industry stakeholders surveyed worldwide was trending at its highest level for the year, which says much for the resilience of the industry. It illustrates the simple truth that other methods of transportation are not a viable alternative to shipping and that innovative operators will always find a way to succeed and survive.

Basil Karatzas, CEO of Karatzas Marine Advisors, when asked about the future of the industry, said: “One thing is for sure – shipping remains a high volatility industry with plenty of opportunities for money to be made. Unfortunately, there are even more opportunities for money to be lost in the short term by following conventional thinking.” This resonates with me as it does with many of us, I am sure.

Unconventional
Several other global thought leaders in shipping, when asked to identify what could save our sector, pointed to the advantages of unconventional approaches to how we do business. According to Brian D.W. Kirk, CEO and co-founder of Hive Maritime, the maritime industry is still in the dark ages of computing and needs to embrace modern technology and data analytics to survive.

Olaf Merk, of the Organisation for Economic Co-operation and Development, noted that what can save shipping is providing more value to clients. “The shipping companies with the happiest clients will be saved and what shipping stakeholders must do is make supply chains as smooth and frictionless as possible,” Merk said recently.

Cutting-edge training programs for our maritime professionals can only enhance this approach. In this regard, I am proud to say that the CSA continues to play a pivotal role in the training of the next generation of shipping professionals. Some US$ 50,000 has been spent per annum on training programs across the region between 2014 and 2016. Over 300 professionals have been trained with the continued support of our partners and members and we are extremely grateful for this. Of significance is the fact that most of our participants in these programs were from our smaller member states. The CSA’s commitment to the education of the region’s youth in the field of maritime studies has also led to 16 final-year students of the Caribbean Maritime Institute receiving scholarships valued at US$ 50,000 from the Monica Silvera Scholarship Foundation over the past two years.

Partnership
This year’s training offerings will be enhanced by the renewal of our partnership with the Arthur Lok Jack Graduate School of Business under a new MoU that is more all-encompassing.

This year will not be the easiest of years. We can be sure that it will be uncertain, chaotic, sometimes erratic. But you can be assured that the CSA will continue to strengthen our training program and advocate for members in the lobby for improvements in the legal, competitive and operational framework that defines shipping in this hemisphere. Much of this activity must be mobilized through vibrant and credible national associations.

There is much work to be done, but I am confident in our ability to handle it all. Let us make 2017 a year of missions accomplished. I look forward to seeing you in May at the CSA’s Caribbean Shipping Executives’ Conference in Curaçao.

David Jean-Marie
President 
Caribbean Shipping Association