Though analysts are uncertain about what 2018 will bring for shipping, there can be no denying that the new year looks set to ring in a realm of new trends for the industry
Analysts in the shipping world have different opinions about what 2018 holds for the shipping market. Speaking on Daybreak Asia on Bloomberg Television in early December, Rahul Kapoor, Asia Pacific transportation analyst at Bloomberg Intelligence, anticipated that 2018 would see a greater market improvement than in previous times.
“I think if you look at the 2018 market outlook for both dry bulk and container shipping, that’s looking much better, and it’s again driven by what we said about the low-supply growth,” he said. “The freight rates are already back up significantly from the lows of 2016, we are seeing recovery in earnings, asset values… So it’s [a] supply-driven story right now. Demand has been growing as the global economy continues to grow – the demand stays robust – but the earnings as well as recovery, which we are seeing in shipping right now, is primarily driven by the low-supply growth. So, for 2018, I would say it’s much better than what we have seen over the past few years.”
Conversely, Fitch Ratings (Fitch), one of the Big Three credit rating agencies, has maintained a negative sector outlook for world shipping, because it does not anticipate a material improvement in market fundamentals in 2018 due to lingering overcapacity.
“The recent recovery in dry bulk shipping rates may [be] short-lived, although unlike for the other segments, we expect demand to outstrip the growth in vessel supply in 2018,” it said in a statement. “The market balance will be helped by the low level of new vessel orders for the last three years.”
“The widespread adoption of distributed ledger technology has the power to transform the shipping and wider logistics industry”
BIMCO is also less than optimistic about the prospects for the dry bulk shipping market in 2018. In a market analysis piece from November, Peter Sand, chief shipping analyst at the global shipowner association, said that the transport demand for dry bulk cargoes in 2018’s first quarter was considerably lower than the volumes moved in the fourth quarter of this year. He also predicted that, with regards to the dry bulk fleet, “2018 could see [it] grow by less than 1%”.
Technological trends to watch
Still, despite the fact that the market is on shaky ground when it comes to picking up next year, 2018 is expected to herald developments that will revolutionise shipping from decades to come. One such example is blockchain, the digital ledger which supports the cryptography technology used by Bitcoin, the currency whose name is on everyone’s lips right now.
2017 has been an astounding year for Bitcoin. The price of a single coin of the cryptocurrency has surged, jumping from less than $1,000 in the first month of this year to a staggering, record $19,783 on December 17. Just a week after Bitcoin began to trade on a major exchange for the first time (Chicago Board Options Exchange futures exchange – the world’s largest options exchange) this month, it started trading on the Chicago Mercantile Exchange futures market – the world’s largest futures exchange. Just prior to the start of December, exchange officials said that the Nasdaq Stock Market, the world’s second-largest exchange according to market capitalisation, planned to launch Bitcoin futures as early as 2018’s second quarter.
With both supporters and critics of Bitcoin stepping up to give their opinions on what the prospects are for the currency, there’s no denying that blockchain-style digital ledgers are technologies to watch. When it comes to the issue of payments within shipping, it’s plausible that blockchain and cryptocurrency-supported new methods could make their way into the maritime sphere.
“There has been tremendous excitement around blockchain over the past year, with major transport players trialling the technology,” says Harry Theochari, global head of transport, at Norton Rose Fulbright. “The widespread adoption of distributed ledger technology has the power to transform the shipping and wider logistics industry and has the potential to significantly lower the transportation costs associated with global trade.”
However, blockchain and its associated uses are not the only technological developments making waves in the shipping industry. Raj Gupta, chief technology officer at port software specialist Navis’ , has identified what he believes are the technology trends in the ocean shipping sector set to have the biggest impact in 2018 and beyond. Though he picked out blockchain as one key trend, Mr Gupta also identified the Internet of Things (IoT), automation, machine learning (ML), drones and sensors as the top technological developments for the industry for 2018 and beyond. He predicted that the move towards automation and autonomous supply chains would accelerate, with 2018 set to witness experimental sailing of fully autonomous container vessels, commencing with smaller container ships, where completely-remote monitoring would eventually be taking place.
Mr Gupta also noted that various military branches were already experimenting with transporting drones using containers and that it was not too difficult to envisage the use of drones for lashing of containers on a vessel, for example. Furthermore, the CTO said that more utilisation of sensors and IoT in the industry will help the capturing of streams of data across different cargo handling equipment and machinery, and that aided by “business intelligence and ML, this data can be and will be mined to improve cargo handling, remote monitoring, predictive maintenance, and other intelligent services and solutions”. Finally, looking at ML itself as a trend, he said that numerous open source ML frameworks were already available and that, be it “automation, autonomous supply chain, forecasting models, stowage planning, yard planning, optimising port operations etc., machine learning will play an important role” in shipping. He advised people to “look to solutions and products coming out based on ML that will help make global trade smarter, safer, and more sustainable for everyone”.
Other potential developments
Outside of the digital realm, 2018 could see other trends emerging. Mr Theochari forecast that mergers and acquisitions would likely remain next year. On a different note, he expected that China’s momentum with regards to using alternative forms of financing would continue.
“China is very likely to continue to drive some of the most exciting and innovative transactions, including sale and leaseback deals structured on both pure equity and equity/debt structures, with debt provided by Chinese, other Asian and a decreasing number of European banks,” the transport head commented. This sense of China as an engine in the shipping world was echoed by Fitch, who said in their statement that when it came to dry bulk commodities imports and trade, the country would stay as the main driver.
“The sector is therefore particularly sensitive to Chinese GDP growth, which we expect to be 6.4% in 2018,” it explained. Additionally, BIMCO noted that steel consumption in the country was a key risk factor “in the equation” when talking about the risk of Chinese iron ore mines losing their licenses.
With so many different factors at play when it comes to forecasts for shipping in 2018, the year ahead is will be anything but dull.