Maritime leaders to manage changing state of play

Asia’s maritime leaders have today 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 today’s 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’s more dry bulk ships in the global fleet,” he said.

Mr 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.
Mr Hashim added that 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 Mr Hashim.

Singapore Maritime Foundation Chairman (SMF) and Managing Director (Marine & Technology) at Keppel Offshore & Marine Ltd, Mr 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,” Mr 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.