Asia’s maritime leaders have called for the industry to adapt more quickly to changing market conditions in order to effectively capture opportunities and ensure its long-term future across the region.
Speaking at a Sea Asia 2015 industry insights briefing ahead of the conference later this month, the leaders highlighted volatile commodity prices as well as fluctuating supply and demand as key drivers behind the changing conditions. Sea Asia 2015 will take place in Singapore from 21-23 April 2015. Leaders at the session added that the speed at which the industry can adapt to this changing state of play will ultimately define maritime’s ongoing success.
Managing director of Precious Shipping Ltd, Khalid Hashim, said “these market forces have created substantial challenges for the dry bulk shipping sector.”
“Asia continues to be the driving force behind global growth but slower-than-expected economic development in some markets has had a significant impact. The recent slow-down in China’s real-estate industry, for example, has reduced demand for iron ore at a time when there are more dry bulk ships in the global fleet,” he said.
Hashim commented that between 2009 and 2012 total dry bulk capacity grew by 12.13 per cent year-on-year.
“Iron ore makes up a significant portion of the cargo transported by dry bulk shippers and this softening demand, coupled with increased capacity, has resulted in a significant shift in the supply and demand balance within the global dry bulk shipping sector,” he said.
Hashim added the industry is taking action to manage these challenges.
“Companies are focusing on driving efficiencies and managing costs to weather these challenging conditions. One of the ways they’re doing this is by scrapping or selling older assets — a move which also allows them to generate more cash. Companies are also raising equity by going back to their shareholders or the market to ensure they have sufficient liquidity to support them over this time,” said Hashim.
Singapore Maritime Foundation (SMF) chairman and managing director (Marine & Technology) at Keppel Offshore & Marine Ltd, Michael Chia commented that fluctuating commodity prices is another new reality impacting the industry. “Low bunker prices have a positive impact on the shipping industry but our marine and engineering sectors are likely to face some headwinds in securing new orders. Fortunately, the industry has a full backlog of orders that will carry them through this year and into 2016.”
“In the meantime we need to focus on increasing productivity, reducing costs and driving efficiencies to manage this volatility,” Chia said.
He added that while this can create short-term challenges for the offshore industry, the industry is resilient and the long-term outlook remains strong.
“Exploration and production (E&P) activities in the Asia Pacific region hit a record US$723 billion in 2014 due to the rising demand for energy. While lower oil prices may impact short-term growth, the region’s fast-paced urbanisation and growing middle class means that demand for energy will continue to grow.” Chia added the industry needs to be prepared to seize the opportunities new trends in energy E&P present.
“Liquefied natural gas (LNG) is a new space which will continue to play a bigger role in meeting energy demand. Here in Singapore, for example, we opened our first LNG terminal last year to help secure the country’s energy supply and establish ourselves as a hub for LNG bunkering.”
“These projects need the right technology and infrastructure in place and the offshore industry is focusing its research and development efforts to support these trends,” Chia said.
Maritime and Port Authority of Singapore (MPA) Assistant Chief Executive (Development), Tan Beng Tee commented the government is working with the industry to ensure it is prepared to manage changing market conditions.
“Singapore continues to keep abreast of global developments and will continue to work with the industry to address and tackle key challenges and position ourselves strategically for future growth,” she said.
“In order for Maritime Singapore to be future-ready, MPA is introducing schemes to develop quality manpower which is critical to drive growth in this global business,” she said.
This year, MPA will inject another US$65 million to the maritime cluster fund-manpower development programme to attract and groom talent for the maritime sector. This additional funding will be used to introduce new initiatives and top up existing training and development efforts to ensure the skills of maritime remain current and competitive.
Tan added that MPA is also investing in infrastructure development.
“The completion of phases three and four of the Pasir Panjang terminal by end 2017 will increase our handling capacity by more than 40 per cent. These investments are critical to enable Singapore to continue driving growth in the sector,” she said.
These changing market conditions and their impact on the global maritime industry will be the focus of discussion at Sea Asia 2015 — an event which has established itself as the leading forum for discussion and debate in the maritime industry.
