Skip to main content
Blog Post

7 issues facing the shipping industry in the new decade

Marine
N/A

By Charles W. McCammon | February 18, 2020

New environmental regulations and financing headwinds are some of the greatest challenges the industry will face in the coming years.

I had the pleasure of attending the Hellenic-American/Norwegian-American Chambers of Commerce 26th Annual Joint Shipping Conference earlier this month in New York. The conference had a great mix of panels and speakers with lively sessions. The overall theme of the conference was the need for the shipping industry to adapt and innovate in response to new challenges such as new environmental regulations, uncertain freight markets and financing headwinds.

Here are my top takeaways:

  1. International Maritime Organization (IMO) CO2 emissions regulations are a big deal. While the near-term regulations for 2020 are manageable with scrubbers and fuel changes, medium-term regulations set for 2030 are going to be difficult. But longer-term regulations set for 2050 will be impossible without drastic new technological breakthroughs. One panelist compared the technological challenge as the change from sailing ships to steam power.
  2. Environmental, social and governance (ESG) criteria may curtail financing if companies do not adopt it. ESG is a set of standards for a company’s operations that socially conscious investors use to screen potential investments. As more institutional investors adopt ESG, companies will need to embrace ESG strategies or risk losing investors.
  3. The Poseidon Principles (cool name) is a climate alignment initiative developed by leading shipping banks to establish a common, global framework to quantitatively assess and disclose whether financial institutions’ lending portfolios are in line with adopted climate goals.
  4. New IMO cyber security regulations are on the horizon. Starting January 1, 2021 Safety Management Systems will need to document compliance. Risk assessments, standard cybersecurity operating procedures, education and training are all requirements that need to be addressed.
  5. The next generation of shipping leaders are focused on sustainability, diversity, technological solutions and environmental stewardship. They are sophisticated about finance and practical about operations. They are highly educated with diverse backgrounds, have a love for the industry and understand its uniqueness.
  6. New digital technologies like artificial intelligence (AI), software as a service (SaaS) and autonomy are right around the bend. The industry is starting to embrace these technologies in many ways including financial decisions, operational oversight and safety.
  7. Capital markets may be unwilling to finance the huge investment necessary to meet environmental regulations. Some estimate more than $1 trillion in capital needs. Systemic changes in the way ships are designed, built and financed may be necessary. Alternative financing and equity markets as alternatives to capital markets need to be explored. The airline business and its manufacturing and financing methods were discussed as a potential future industry model.

To understand the future, lets briefly look at a past pivotal moment in the industry. Shipping regulations following the Exxon Valdez disaster and the Oil Pollution Act of 1990 created major challenges to the industry. Changes to the industry to combat oil pollution like building double-hulled vessels and implementing Standards of Training, Certification and Watchkeeping (STCW) was a major challenge. However, those challenges were primarily limited to the oil major industry, which was powerful and financially healthy.

IMO 2030 and 2050 create considerably more challenges. Today’s new environmental regulations will impact all shipping sectors, including the large yacht business. Moving away from petroleum and its CO2 emissions is a much larger hurdle.

As with all difficult challenges with industry-wide innovation, there will be many opportunities. The shipping industry faces an uncertain future, but the experts, panelists and participants at this conference appeared to embrace the future with a very positive outlook.

Author

National Team Leader – Marine Risk Consulting and Claims Advocacy Group

Charles leads the Marine Risk Consulting and Claims Advocacy team in North America, which offers a variety of risk consulting, loss control and claims management services. He has a background in the shipping industry that includes operational, surveying and legal experience. He is a graduate of SUNY Maritime College and Loyola University (New Orleans) Law School, and is an Unlimited Master in the Merchant Marines.


Contact Us
Related content tags, list of links Blog Post Marine Marine

Related Solutions