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Seafarer supply is expected to tighten heralding higher manning costs

The attractiveness of a career at sea has been an industry concern for a number of years. Long periods away from home, increasing administrative demands for paperwork on board, and the threat of criminalisation being major factors. Covid-19 impacts, which have been particularly harrowing for seafarers, have added to these issues, presaging an inflection point in global seafarer supply. As a consequence, labour market conditions are expected to tighten, adding to seafarer wage inflation and vessel operating costs.

Drewry projects that the current officer shortfall to crew the global merchant fleet will widen, due to the reduced attractiveness of a career at sea and rising man-berth ratios. The effect of the former will be to slow the growth of seafarer supply, while extended leave periods and reduced tours of duty to maintain the attractiveness of a career at sea, will raise demand. A more detailed analysis of these projections can be found in Drewry’s Manning Annual Review and Forecast 2020/21 report.

One of the major impacts of Covid-19 has been to expose increasing numbers of seafarers to extended tours of duty due to crew change challenges. In many cases, tours have been extended to nine months or more, when three to four months is the norm for senior officers. However, some nationalities such a Filipinos are used to six-month tours for junior officers and nine months for ratings in normal circumstances. Although difficult, crew changes are taking place and responsible companies are doing their best to make life on board more tolerable with increased food budgets and internet bandwidth.

Pandemic-induced crew change complications have also swelled the ranks of out of contract crew, forced to remain at home and unable to join vessels as scheduled. Most of these have been without income for the length of the crew change delay, forcing some to seek alternative shore-based employment and the likelihood of not returning to sea. To counter this some employers have been paying ‘at home wages’ to retain seafarers which is mitigated some of these risks.

But it also remains the case that officers are generally well paid compared to other jobs available in the local economy. Taking the Philippines as an example, 2nd Officer wage rates are as much as three-times higher than average earnings, as measured by GDP per capita of work population (see chart). An AB wage, relating to the basic ILO ratings rank, is lower than the average by around 20%.

Hence, the unpredictability of employment at sea, exacerbated by the Covid-19 pandemic and particularly affecting ratings, may be the biggest threat to future seafarer supply.

The Philippines has long been the biggest supplier of ratings with China, Indonesia, Myanmar and Vietnam commonly cited as viable alternatives. However, these countries have issues of their own. Myanmar has recently experienced a military coup; China is providing ratings mainly for its domestically flagged fleet; and Indonesia and Vietnam lack the infrastructure necessary to fill any significant gap left by a potential fall in supply of Filipino ratings. India is another big supply nation but wage rates for ratings are no lower than for Filipinos.

Officer rates of pay for most nationalities and on most vessel types remain well within the ‘professional classes’ range. Combined with often favourable tax treatment, opportunities for comparable shore-based employment are relatively limited. While risks remain that officers nearing the end of their careers may bring forward retirement or shore-based work plans, it is unlikely that the many ambitious junior officers will relinquish a career at sea for a relatively short-lived crisis which now seems near to resolution. Reliable Covid-19 vaccines are now in global deployment and worldwide co-operation to facilitate crew changes is gaining momentum, as is recognition of seafarers as key workers.

If there is a crisis of supply it therefore seems likely that it will be mainly in ratings ranks where opportunities ashore are more comparable and available. Employers will therefore need to watch rating recruitment and retention very carefully and prepare accordingly.

However, the short training period for ratings provides a lot more flexibility than would apply to officers. If Master and Chief Engineer retirements were to accelerate, this could well create a skills gap with lower ranks being promoted in turn, perhaps without the desired experience. This may lead to wage inflation of Chief Officers and 2nd Engineers able to step up to Master and Chief Engineer ranks with little additional training. In turn experienced 2nd Officers and 3rd Engineers may be promoted, increasing demand from companies looking to secure their senior officer succession planning.

The impact of these developments is rising wage inflation which will add to pressure on already rising vessel operating costs.
Source: Drewry

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