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Outlook 2021 for the Shipping and Maritime Industry: High Tides and Recovery

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The Shipping and maritime industry has witnessed immense disruptions and obstacles throughout the year, be it the raging container scarcity crisis, the export-import imbalance or the overall blow of the pandemic. However, it is hoped that the industry will rebound to recovery in the coming quarters albeit gradually.

Disruptions leading the way for a paradigm shift in the sector:

Recovering Trade:

With exports bouncing back stronger, and imports, which saw a plunge in the last quarter, slowly picking up, the trends in trade look quite promising. However, there are still some steps to go before the sector can reach pre-COVID levels.

“We expect recovery in its truest forms in the first half of 2021, however it depends a lot on several external factors, first of which is the vaccine against COVID, its efficacy and its global distribution.”

~Steve Felder, Managing Director, Maersk South Asia

Mr Felder adds, “From an India standpoint, we see efforts from the Government to improve the state of logistics and supply chains through investments in infrastructure development and technology adoption. If these two pick up pace in 2021, it will be a big boon for the logistics sector. Bilateral agreements with various geographies around the world to support more trade, policy reforms to support higher investments in the country for more manufacturing, development of hinterland infrastructure and port connectivity and faster, paperless processes to improve efficiency are some of the areas that could bring about a vast change in the way logistics works in the country.”

Lessening dependence on China:

The year will provide stimulus to the growing need of reducing dependence on China.

“China undoubtedly is the key driver of the shipping industry but the outbreak of the coronavirus is surely depicting horrendous effect on the global shipping markets majorly due to its relationship with China.  In view of the current scenario, we anticipate the shipping industry to witness a significant change in 2021 with a major shift from China to other uncharted territories. As we see, many countries are already looking at newer markets and moving their base from China to other Southeast Asian countries like Vietnam, Thailand, Laos etc” writes Capt. Rahul Bhargava, COO at Essar Shipping Ltd.

The slump in demand for goods from China during the pandemic certainly had a ripple effect on the industry from container ships to oil tankers. Trade has been severely impacted, charter rates are down, supply chains have been majorly disrupted.

Although the change will be gradual, it is predicted that the industry will bounce back to recovery.

“Markets will eventually open doors for new trade discoveries which will strike a balance between the imports and exports.”

~Capt. Rahul Bhargava, COO at Essar Shipping Ltd

Uncertainty of the global economy:

The uncertainty pertaining to the global economy in addition to the pandemic may pose tough questions for the recovery of the industry.

“Many companies have reported earnings either above year-ago figures or have at least exceeded initial expectations in 2020. However there are some dark clouds that could potentially see a shift in outlook for 2021 -the uncertainty is related to the global economy and how long the coronavirus pandemic will last”, writes Sanjam Sahi Gupta, Director, Sitara Shipping

“One of the key reasons why container carriers have been able to record such high freight rates this year, is managing capacity eg. blank sailings introduced early and hard to align supply better with the fall in demand. But that situation is already reversing with ships being returned to service also with new orders expected to jump in 2021, any small change in fleet size could have an impact on market rates by the time the ships are delivered”, she states.

“Ship owners are hit with issues such as the crew change crisis and there is no solution in sight. Also the cost of the drive towards zero-carbon shipping by 2050 will be an expensive one. Predicting the pandemic’s longer-term impact as well as recovery is uncertain.”

~Sanjam Sahi Gupta, Director, Sitara Shipping

Government Policies

The government has upped the ante with efforts to improve the scenario through investments in infrastructure development and imbibing more technological solutions. If all goes well, this may turn out to be the best formula to sail past the turmoil, coupled with steps to support trade, policy reforms, efforts to improve hinterland infrastructure, port connectivity and going paperless.

The road to Decarbonisation:

Decarbonisation has emerged as the need of the hour, as underlined by Ms Gupta.

“There is a call for urgent adoption of alternative fuels e.g. hydrogen, as well as a wider rollout of electrification.There is an increasing focus on environmental friendliness. As the ships get bigger and better, there is also continuous innovation that focuses on reducing the carbon footprint of ships”, Ms Gupta shares.

Additionally, “China + 1” sourcing strategies are benefitting South East Asian countries, and there is much potential for India to take advantage of this shift, shares Mr Felder.

Key factors favouring this development are Government’s initiatives to attract investments, focus on developing port and landside infrastructure, technology adoption and automation, lower labour cost and availability of raw materials. Further impetus towards long-term policy reforms should encourage local manufacturing, and developing bilateral and multilateral trade partnerships hold the potential to propel the country further, and support its economic growth, he writes.

Tech Invasion in Shipping: Big Data Analytics

The use of Big Data has risen to prominence in the past few years, owing to its undisputed importance in facilitating decision-making, in ship-designs and overall logistical support.

“Although there are so many benefits of having data and improved analytics, there’s also the issue of security. Commercial shipping operations are going to see an increased need for cyber security and data protection”, Gupta shares.

This is an abridged version of the Cover Story. To read the full article, click here.

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