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Shipping Industry

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SHIPPING TRENDS
Capt. S. Pullat
BA, MCIT, MCIArb, FICS
AUMNI Shipping Consultants

In the midst of technological developments, its application and futuristics, the Customers seem to be relegated to the back seat. Beware, if one does not treat them like a King or at least a la Prince, they could be King makers, and any case has a decisive role to play in all our endeavours for success. For, if we are driven by technology alone –as predominantly this forum is- we must ensure that it is affordable, safe, has redundancy and environmentally and user friendly as well.

Technology per se does not solve problems, it enables problem solving and must be proactive too so that obsolescence can be planned and replacement provided for. Perhaps there is a lot to learn from the Computer industry, software sector in particular, as to how upgradation or newgradation is to be effected frequently.

A cyclical and capital-intensive industry such as shipping has been slow to change and innovate, so much so it is driven by regulators and not industry itself. Such hindsight methodology has considerable time lag before ushering in corrective measures and in the interim the industry’s image and perception has suffered in the eyes of users and the public at large. Handful are the cases where ships are built to higher specifications than the bare minimum that Class calls for. A major operator recently citing experience criticised the need to shell out huge sums to overcome the cost saving nexus between Class and Yards. Another one questioned why Ships have only one year guarantee, when automobiles befit five years.

The reluctance to accept age as a criterion for phase out is strange, considering that it is a norm for us humans in work and play. Few, if at all any, will be the better ships that can safely prolong their life commercially and usefully, if not technologically outdated by course of time. High tensile steel definitely does not help anyway. The catastrophes in bulker segments need to be recalled and learned from. Plates have been thinned down to the lower end of tolerance, questioning the principle of `fit for purpose’ itself. Committed owners used to design and build ships to very high standards during the evolution of general cargo Liner Trades. (Apparently Maersk does in the container sector). Whether standard cheaper designs through series building, technological leaps and frequent regulatory changes are the causes or effects is worth weighing. But it is pertinent to turn back and review.

The use of cheapest fuel, worse than the last dregs in the barrel –used automotive oils mixed with furnace oil- has invited environmentalist’s wrath by having to introduce new engines over a decade or two. Thankfully, common rail injection and camless engines on the horizon will bring timely relief. A decade and a half ago, the industry was keen to blend the most viscous and vicious concoctions and introduce Auxiliaries run on heavy fuels. Rather than external forces dictate, shipping requires to be self-governing. It has taken a generation and more to realise and recognise the flawed approach to freeboard and loadline assignment especially for bulkers. This kind of inertia needs to be overcome. Likewise with pre and post Marpol tankers limping between exceptions and exemptions from one unwelcome trading area to another. The case of Ro-Ros, Ferries and of late the concern about passenger evacuation from cruise ships are atypical.

Most regulatory efforts have not been successful as they should have been, resulting in yet more continual rules over the last thirty years. Has ISM changed all that? Too early to tell, though its proponents will quote figures and P&I findings. Over capacity in all sectors –from shipyards to H&M, P&I insurance- and their thin margins have been the propulsive force behind most cost cutting measures. The sea hasn’t changed for the better since the continents were discovered half a millennium ago. In fact global warming, worsening climatic effects and intensifying weather changes with increased severity and frequency of storms call for better ships and not `more economical’ ones. The underpowered super-economy ships of the ‘80s is a nightmare in some ports.

What the Customer wants is not a percentage justification of shipping adventures and misadventures. They would like –and demand, given a chance- dependable quality at the lowest cost with least margins, on time, every time, time and again. Just in time contracts with penalties for late deliveries are the norms in Supply Chain Management of Logistics. These are the inputs that go into backroom ERPs (enterprise resource planning). Excuses, explanations and compensations would not suffice; they are unwelcome and immaterial.

Ship design and construction have been stymied by the rule bending and circumventing approach. What is called for is better Risk analysis, Fatigue monitoring and Risk management provisions. Now that technologies are proven, real time online information exchange and analysis can be mandated. Liabilities can be expected to catch up, and even Class will not be able to stand away from such backlashes. The large container ships, hatchcoverless and otherwise, with disproportionate deck stow trying to save on port costs and lashing, and the very many paragraphers skirting the well meant thresholds are apt examples. And what of the ports that ships go calling? Safety at ship/shore interface is at low level mainly with cargo handling and berthing. The perceived third party insurance cover is the temptation and often exploited.

Except for the impact of economy of scale –witnessed by larger and larger units- conceptually, shipping is backward as compared to very many other industry developments. True, Twin hulls and Wind Assisted propulsion (WAP) have been pursued, but in terms of progress relative to developments on land and in aviation, shipping trails in its own wake. Perhaps, the internal combustion engine –even with its relatively high specific fuel consumption rate and low energy recovery, is beyond further improvements. Admittedly, heat exchangers, turbo chargers etc have been incorporated, and kinetic energy recovery through Fins, Ducts, Shrouds, Vanes etc have negated the old understanding of `slip’ itself. Hopefully, Gas, Electric and Combined cycle propulsions are bound to impact sooner than later.

Instead of clogging the city ports and dragging the old ports further out to sea through trestles and piers to reclamations, shipping is the ideal catalyst to relocate infrastructure along the coast to new undeveloped areas. This approach is very timely and beneficial in the Indian context. Domestic shipping has many grievances against existing systems and policies. At the same time, it is really up to the industry segments to innovate in their own specialised fields. The absence of Ro-Ros is a classic shortcoming.

Maritime technology isn’t just about shipping alone. What India needs is appropriate marine technology in diverse fields as Boat building, Inland Waterways, Infrastructure (there are plenty of developmental tax incentives to start with), Dredging, Buoyage etc. Sloar, Wind and Wave power need to be garnered and distributed along the coastal belt. Micro power holds the key to development of remote areas. Sloar power in Buoyage and Lighting, and decommissioning of old Lighthouses etc are overdue. The Sethusamudram project will eventually become a reality; how soon is anybody’s guess though.

Gazing ahead, now that 100% FDI (foreign direct investment) is permitted in Indian shipping, takeover threats could be real; joint venture partnerships will evolve between owners themselves and between owners –both Indian and foreign- and user industries. As tax planning as an entry means for ownership has become less relevant, Leasing could be the preferred alternative and the expertise should focus on operations and not in financial engineering. This could prove to be the turning point for the commercial sector of Indian shipping. As and when full convertibility of currency is freed, a sea change can be expected too. From the dawn of liberalisation, the Transport sector has attracted the maximum of FDIs and this could only balloon when controls are removed.

Sea islands for handling very large Container ships, Bulk carriers etc need to be developed so that the intrinsic value of city port areas can be put to better use, viz: Passenger transportation, Ferries, Hover crafts, Ro-Ros etc and earmarked for recreational purposes for Boating, Sailing etc. VTS in harbour approaches and Traffic separation lines along the coast are becoming a necessity. Technology for Floating Production Storage and Offloaders (FPSO) for LNG is being perfected which could kick off off-shore power generation.

Shipping will steadily get integrated with other transport sectors becoming subservient to the needs of trade and transport as a whole. Sea-Air is a specific linkage which has tremendous potential and remains to be exploited. Enabled by internet information exchange and convergence using high bandwidth, Information technology will facilitate and simplify host of shipping and trade related matters. Documentation is only just one of them. On line Booking, B/L issuance, Scheduling, Track, Trace and Claims will become the norm. Diagnostics and remote intervention will become realistically possible. Like GPS has perfected Navigation, Technology needs to be innovated, imported to and exploited so that shipping as a transportation service can be made more reliable and economical.

Capt Suryanarayanan Pullat serves the Shipping Industry through his own AUMNI Shipping Consultants, OffShore industry through Marine Offshore Safety Services and Seafarer recruiting through Professional Maritime Group.

After completing training on Dufferin (69-71) with Extra First Class, he sailed with Shipping Corporation of India, associated Shipping Services of London and Neptune Orient Lines of Singapore.

He passed Institute of Chartered Shipbrokers Intermediate and Final Examinations in ’85 and ’86 topping internationally both times. He graduated with Economics as a core subject in1987. He is a Fellow of The Institute of Chartered Shipbrokers since 1988, Member of Chartered Institute of Transport since 1989, Member of Chartered Institute of Arbitrators since 2000 and a Supporting Member of London Maritime Arbitrators Association. He can be contacted at pullat@vsnl.com and his website www.pcsadvt.com/pullat

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