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Maritime Industry: Strategic Insight into Current Issues and Future Outlook
Frost & Sullivan, Nov 2009, Pages: 48
This Frost & Sullivan research service titled Maritime Industry: Strategic Insight into Current Issues and Future Outlook provides an overview of the maritime industry, market drivers, restraints, industry challenges, market size, and forecasts for trade volumes. In this research, Frost & Sullivan's expert analysts thoroughly examine the following: ports, ship building facilities, ship owning, and ship managing companies.
The shipping industry is going through a rough phase due to macro economic conditions. the trade volumes are down and so are the freight rates. Most of the shipping entities are struggling to survive these difficult times. There are clear signs of economic recovery in the other sector but on the contrary maritime industry has not shown any such indication of recovery form effects of havoc created by the latest economic tsunami.
Market Overview
Bleak Economic Scenario Dampens Immediate Prospects for the Maritime Industry
After years of a solid 5 percent compound annual growth rate (CAGR) growth, the global maritime industry has presently been reeling under the impact of the ongoing economic crisis. It is expected to experience a few years of decline due to the overcapacity of ships, and a substantial reduction of shipment, resulting in a drop of 60 percent in tariffs. Overall, the shipping industry is witnessing a new trend of consolidation. Smaller companies, which are asset heavy, are merging with larger organizations in order to survive these difficult times. Observations indicate that the prospect of considerable improvements in trade volumes before the end of 2010 is unlikely. 'It can be safely assumed that the shipping industry will learn its lessons and emerge stronger from the current economic crisis,' notes the analyst of this research service. 'However, there is still a long way to go, at least three years, before the shipping industry bounces back to its earlier prosperous times and freight rates are rationally stabilized.'
Most companies in this domain are struggling with the problem of positive cash flow. The major challenges facing the shipping industry not only stem from the economic standpoint, but also arise from strict enforcement of emission regulations and increasing safety and security issues. The Rotterdam rules are expected to replace the old Hague, Hague–Visby, and Hamburg rules. These regulations will provide fresh and fair legal rights to shippers and other cargo-interested parties. Shipping lines and terminal operators will be exposed to new legal claims system for damages, stolen goods, and shipment delays. The criminalization of seafarers is a prominent issue clouding the industry landscape. Sea farers are subjected to severe penalties and punitive charges for acts that have nothing to do with criminal negligence. In addition, carbon emission is a matter that will ultimately determine the future of the shipping industry. Emission control measures require the fitting of detectors and making expensive changes in the machinery deployed on board. This exerts additional pressure on the shipping organizations that are already struggling.
Under the current circumstances, collaboration shows the way forward. Additionally, companies must look internally to eliminate non-value adding activities. Removing 'Muda' from their value chains and focusing on customer satisfaction, which assumes greater importance during these testing times, has the potential to help companies to stay out of the red. Port authorities and operators must optimize utilization of existing capacities rather than building new ones and dealing with excessive idle capacities. Ramping up infrastructure capabilities to cater to regional needs will eventually lead to profitable operations. This applies to shipping companies that should strategically analyze the profit earned on each route, and reduce the number of services on the route where trade volumes are severely down. 'For survival in the shipping market, it is essential to maintain the flexibility required to take advantage of any emerging opportunities and to act on available market intelligence,' says the analyst. 'Major financial benefits will be associated with well-timed market activity – the probability of shipping companies achieving the latter will be markedly improved through the undertaking of regular appraisals of markets and market prospects.'
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