Challenges facing the shipping industry

05 February 2018

Legislative challenges and the need for the industry to work together with regulators on a range of key issues was top of the agenda when shipping industry figures met at Maritime Cyprus 2017.

Over 800 delegates descended on the Mediterranean island last October for the 15th conference, which has been running every two years since 1989.

The participants, who came from around the globe, included shipowners, managers, brokers, lawyers, bankers and other industry representatives, who gathered on the island to discuss Shipping: 'Yesterday’s World, Tomorrow’s Today’.

The President of the Republic of Cyprus opened the conference, which was also attended by the Secretary General of the International Maritime Organisation (IMO), the EU commissioner for Transport, the Chairman of the International Chamber of Shipping (ICS), and the President of the European Community Shipowners’ Association (ECSA).

The delegates discussed a number of vital challenges facing the shipping industry today, including policy, finance, environmental issues, energy, technology and geopolitical developments. “The hot topic at the conference was over legislation and whether it is too much for the industry. Is the industry still able to cope with the legislative burden? Are we all aligned and in the same boat? Do the regulators appreciate what it takes for the whole industry to commit to these things?” says Anna Vourgos, Director at Aphentrica Marine Insurance Brokers.

The regulatory and legislative challenges facing the industry are wide-ranging and far-reaching: from decarbonisation and the need to plan a future that is both environmentally and economically sustainable, to the march of technology that may see autonomous vehicles in the near future while taking into account the necessity of maintaining and improving cyber security.

Vourgos continues: “The industry is concerned about regulation and legislation. Everybody is concerned with everything being in line and being realistic. We are trying to work closely with the regulators but different countries have different agendas and are coming from different political positions.

“The industry is trying to be united and we’re trying to come up with a uniform approach and trying to get everybody on board. The industry does welcome regulation and legislation but we expect the regulators to be more realistic. That was the prevailing theme of the conference but we were also talking about ship finance and the impact this industry has on the bigger picture.”

Regulation

The first panel discussion of the conference was devoted to regulation on the theme of 'future shipping strategy: regulators vs. industry'. Participants included representatives from the IMO, the ICS, the European Commission and the ECSA.

The consensus of the discussion was that regulators and industry are working together to achieve common, shared objectives. One such objective is the challenge of reducing the industry’s carbon dioxide emissions. The IMO has already taken a leading role in discussions for a global strategy that will set targets for the reduction of the industry’s emissions.

However, the need for the development of alternative fuels and new propulsion systems in order to potentially lead to a zero carbon future was also raised by delegates. And the industry’s commitment to a low carbon future was noted as well as its desire for an even better approach to maritime legislation, building upon the comprehensive global framework already provided by the IMO.

These themes were expanded upon and explored further in a later discussion entitled 'The cost of smoke'. This panel’s debate focused on the air pollution burden imposed by shipping, which in past years has led to an upsurge of international, regional and national regulations. Some of these regulations will enter into force in the near future while others are at the development stage.

What the future holds

Other discussions centred around what the future might hold for shipowners. Panellists, including Andreas Hadjiyiannis, President of the Cyprus Union of Shipowners, and George Procopiou, Chairman of Dynacom Tankers Management, agreed that the market is finally improving, with the bottom of the market for ship prices having now been passed.

The panellists claimed the future was starting to look more promising for the sector with rates improving in some trades.

They also noted that the Chinese economy remains key to the profitability of the shipping industry while it was noted that the Indian economy is also experiencing impressive growth. Chinese finance is also playing an increasing role in the shipping industry as they continue to fill the vacuum left by the reluctance of European and American banks to finance shipping.

The panel concluded that, although shipowners were once again in a position to consider ordering new ships, it would be wise for them to exercise a level of caution and prudence in these decisions. This advice was set against a backdrop of record scrapping of ships in 2016 and a record low of deliveries expected in 2018.

Vourgos says: “It has been almost ten years since the start of this crisis so it is probably the longest recession we’ve had in the shipping world. The important question is what are the lessons we have learned from all this? We’ve dealt with the recession, we have dealt with the issues, and we have survived but have we learnt the lessons for tomorrow?

“The insurance market needs to be more proactive to deal with these changes and see ahead to what is happening. Yes, the insurance market is heavily involved via various shipping organisations, the ICS for example, but are we doing enough?

“We are offering cost-effective covers to the owners to help them with their costs but it goes beyond securing a good deal. We need to look at these things from a risk and claims management point of view and aim to align our insurance product with the needs of the industry.

“Via our strong presence at the conference, the representatives of JLT Specialty and Aphentrica ensured we conveyed this message to the industry and showed we are ready to meet these needs.”

Aphentrica Marine Insurance Brokers Ltd are maritime representatives of JLT Specialty in Cyprus.

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For further information please contact Sean Woollerson, Senior Partner on +44 20 7558 3864 or email sean_woollerson@jltgroup.com

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