Shipping can succeed by adopting technology
Despite stormy seas for the global economy, the shipping industry has some causes for optimism, according to industry expert Richard Greiner. The BDO Partner believes that while geo-political trends and the growing importance of environmental policy may wrong-foot the industry, adopting innovative technology can help shipping firms survive and thrive into the new decade.
Through much of last year, it seemed as though Britain’s export industry was set to endure a torrid 2020. With orders falling despite a weakened pound, something which had previously buoyed demand from overseas, dark clouds seemed to be on the horizon for many aspects of the import/export sector’s supply chain.
The shipping industry in particular faces some very significant challenges over the coming years, particularly with the culmination of Brexit finally due to arrive in 2020. However, despite this, experts from advisory and accounting firm BDO insist there are a number of reasons to be cheerful as shipping companies enter a new decade.
In an article on the firm’s website, Richard Greiner, Partner, Shipping & Transport at BDO, explained, “At the end of 2019, confidence in the industry was as high as it has been at any time in the past six years. Despite a general slowdown in global GDP, demand for the industry’s services remains strong, while a contraction in the number of new buildings on order and a steady stream of recycling has brought supply under stricter control. If supply and demand are in harmony, much good will inevitably follow.”
Among the challenges shipping faces, Greiner highlighted exchange rate volatility and the question of whether US interest rates will continue to fall, with the replacement of LIBOR in 2021 fast approaching. At the same time, firms will have to reckon with the enhanced importance of Environmental Social Governance (ESG). Meanwhile, global geo-political change has the potential to make serious waves in the shipping segment.
“We now know that Brexit really does mean Brexit,” Greiner said, “but what does Brexit itself really mean? There are a number of presidential and parliamentary elections scheduled for 2020, including those in the United States, Egypt, Greece, Hong Kong, New Zealand, Poland, Singapore and Venezuela. Each has the potential to impact shipping in a positive and/or negative way.”
Above all, however, the key challenge for shipping – like almost every other industry – currently comes in the form of technological innovation. Greiner argued that firms in the industry need to remain at the crest of the wave of digital disruption sweeping shipping, maintaining technical innovation for ship and engine designs. To get the best results, they need to harness required technology such as Big Data and Artificial Intelligence, while ensuring that such technologies are used to address actual business needs in the sector. If firms can do this, regardless of other factors, they are likely to have a bright future.
Greiner concluded, “Over decades, most markets historically rise as often as they fall. Shipping has weathered the past decade better than many predicted, and so enters the new one all the stronger for that. If it can meet the financial, technological and regulatory challenges which it faces, it will continue to be attractive to existing and new investors alike.”