The negative economic impact caused by coronavirus will probably only become apparent in autumn when the effects of the crisis will surface in the balance sheets of businesses and thereby also reach the ordinary people. The maritime industry will certainly not be left untouched by the crisis. However, in the long run there is a solid foundation for growth in the sector. Hannes Lilp, the owner of a ship construction and repair company SRC Group AS, writes about megatrends in the maritime industry.
It probably comes as no surprise to someone working in the maritime sector that more than 80% of the world's goods move by sea. Shipping is the force behind the world economy — it is one of the most important and environmentally friendly methods of transportation that humankind has come up with.
The same volumes in the oil industry
The modern developed society cannot function without energy. In my opinion, despite looking at the different scenarios on how to produce energy, today's demand for oil and gas products will not decrease in terms of volume in the next few decades. There might only be changes in the shares of total electricity production — for example the percentage of green energy is increasing and the percentage of oil products is decreasing accordingly.
This is largely due to the fact that it is already apparent now that by 2050 there will not be enough funding for green energy projects to ensure energy security in states. Therefore, oil and gas will most probably remain in use until reserves are depleted. However, the sector will definitely become more efficient and environmentally friendly than it is today. This in turn will provide work for maritime companies.
Offshore wind farms create growth opportunities
In the future, the Offshore sector will not only rely on oil and gas. Until recently, states had to heavily subsidize offshore wind farms and wind technology so that it would make sense to produce electricity by these means at all. Now however, offshore wind farms have become reasonable cost investments that can operate under market conditions.
Floating wind farms, which have already been tested in some places, offer very interesting opportunities for the Offshore sector. Since, the 2017 construction of the first floating wind in Scotland developers have shown increasing interest in floating wind farms. The advantage of floating wind farms is that they can be built farther from the coastline, are better for the environment and less disturbing to people.
Ships will be designed to be more environmentally friendly
The most notable changes in the shipbuilding and ship repair sector (both in which our own company is active) are connected to environmental standards. These requirements often concern ship exhaust emissions and ballast water systems.
Hybrid solutions, whereby ships are made more environmentally friendly and less polluting through battery solutions, have also come into the picture. These types of systems make it possible to visit city harbours without polluting its air.
Battery solutions also suit smaller ferries that travel shorter distances. In principle, with the current technology and with agreeable ships, it is possible to carry goods for shorter distances, such as the crossing of the Gulf of Finland (Tallinn-Helsinki-Tallinn), with the help of battery systems.
The volume of ship constructions will not stop
There are too many ships in the world's merchant fleet. That is why ship chartering prices are low, while causing difficulties for ship owners such as creating the need for ship owners to consolidate.
In principle, the construction of ships could be stopped for several years, they could be modernized a bit and be left to wait until the situation has returned to normal. Nevertheless, we are still seeing quite a big increase in construction volumes.
Why are these new cargo ships being ordered? Mainly because engineering solutions have evolved a lot over time. If a new ship can be operated 20-30% cheaper, it is already a good argument to construct the ship.
New ships also comply with more standards or are just more environmentally friendly. That is an important argument to construct such ships. For example, large oil companies with strong market forces often force shipowners to invest in green technologies so that they can tell their customers and governments that they care about the environment and they also demand the same of their partners. Inter-governmental agreements also impact this process.
Autonomous ships are the future of merchant shipping
One of the major and important trends is the growth of ship automation and the development of autonomous ships. Prototype ships have been built for some time already, especially in the military. In Norway, the world's first emission-free autonomous commercial vessel, Yara Pirkeland, will soon be completed.
Unmanned vessels are safer and more efficient than manned. It is a well-known fact that 80% of all insured events with ships are caused by human error. If we eliminate the human error, we also significantly reduce the number of shipping accidents. Costs will also be reduced, as there will be no need to keep a crew on ships.
At the same time, it must be acknowledged that the crews of larger cargo ships have already been made so efficient and minimal today. Thus, crews are not as significant of a price component for cargo ships as they are for passenger or cruise ships. A cruise ship's crew can often be 1,000 or more people.
In Finland, attempts have been made to make ferries between islands move without people. Nevertheless, whenever there is a passenger, it has to be thought what can be done when a conflict between passengers or a health issue emerges. When it comes to passengers, we will probably not get away without having the ship manned just yet.
Autonomous ships are certainly the future of the industry, but common standards must be agreed before their deployment, in order to ensure safety at sea. This legal framework has not been agreed upon yet, and we will have to wait a few more years.
Information technology is finding its way into the maritime industry
The advent of information technology to sea has certainly already begun, and this is a major trend that we must take into account.
A very important issue with autonomous fleets in the near future will be cyber security, because we will see more and more cyber pirates and terrorists trying to take control of ships.
When it comes to the sharing economy, which has changed the market for taxi or courier services, there will be some changes in maritime transport and the organization of maritime transport ahead of us as well.
Ferries are becoming more and more floating department stores
Tallink, the leader of Baltic shipping, has performed particularly good and has been pioneering in the ferry industry, as they have changed the nature of doing business all over the world.
The Estonian company has made the transport of people as efficient and comfortable as possible for passengers, but more importantly, taking a ship has become a way of spending leisure time for people.
Basically, Tallink's ferries are mobile shopping centers, where people can spend their time shopping, enjoying a delicious meal or having fun. This trend is certainly spreading to other parts of the world, as it makes the provision of ferry services more profitable.
The cruise industry continues to grow
Cruise shipping is a very fast-growing form of entertainment. This sector has suffered a major setback in the context of the coronavirus, but they will certainly come out of it.
Had it been any other crisis, the cruise industry would have continued very successfully. The reason is that their client is a pensioner who has already accumulated their wealth and is receiving a stable pension. Crises do not have as much of an impact on these people as they do on working people.
Despite everything that has happened in the market today, cruise companies have been able to raise money in the crisis conditions - Virgin Cruises finished new ships, the Ritz-Carlton hotel chain also came out with its cruise ships.
Given the rapid growth of the tourism sector, there is certainly space for the cruise industry to grow.
