This article will explain the role shipowners have in the marine industry, the current issues they face and how these issues can be balanced by introducing some changes.
Who are shipowners?
Shipowners are owners of merchant vessels, who equip and exploit a ship for delivering cargo, people or other services. This is done in exchange for a freight rate, usually either ‘per freight’ or based on hire (e.g. per day). Shipowners can be private individuals as well as legal entities such as funds and companies which hire a crew and a captain to operate the ship.
Shipowners are often members of national shipowners’ associations such as the Danish Shipping Association, regional associations like the European Community Shipowners’ Association or international ones, such as the International Chamber of Shipping. These organisations represent the interest of shipowners before national governments, the EU and other national and international bodies.
What are (some of) the current issues shipowners face?
The key issues of 2019 identified by the International Chamber of Shipping (ICS) are:
- The 2020 Sulphur Cap;
- CO2 Reduction
- Keeping the regime under the Convention on Standards of Training, Certification and Watchkeeping for Seafarers fit for purpose;
- UNCLOS Implementing Agreement;
- Piracy and Violence;
- Economic Uncertainty and Risks.
All of the above risks, as well others identified further in the ICS Report, make it more difficult for shipowners to retain and grow their business. Legal measures such as the 2020 Sulphur Cap and the 2050 net-zero emission goals put pressure on shipowners to equip their ships or order newly built ones to meet the demands of the legal framework. This can create additional costs by e.g. fitting scrubbers, switching to low sulphur fuel and investing in zero emission technology for the future, among other increases in costs.
In addition, piracy, economic decline and uncertainty can also take a toll on shipowners’ businesses. Examples of the latter are the tension between the United States and China, the risk of a hard Brexit, and the economic decline of recent years.
How can these issues be alleviated?
First, by eliminating misconceptions surrounding independent manufacturers and suppliers of spare parts, shipowners will be offered more competitive prices and qualitative high spares. The current market practice and the outdated legal framework under MARPOL Annex VI affect the independent companies in the aftermarket negatively and allow misconceptions about their quality and services to spread. Shipowners would also benefit from the abolition of these misconceptions because independent companies drive innovation by offering unique solutions (to the issues mentioned above).
Second, another way to alleviate these issues is to regulate the digitisation of the industry properly. Digitisation is a threat to both shipowners and independent manufacturers. Currently, more and more marine engines are fitted with electronic control units (ECUs). Often, the software of these ECUs comes with a password which is needed to service the engine. However, even the shipowners do not always have access to the password, making it impossible to use another service company than the engine maker or its affiliates. This trend could potentially drive independent companies out of the market, eliminating choice and competitive prices, and deepening monopolisation. By providing shipowners with the password and thus chance to choose who services their engine, not only independent companies will benefit, but primarily shipowners as they will have a greater choice and be offered more competitive prices.
Finally, ensuring the independence and impartiality of classification societies can also alleviate these issues. Classification societies are private entities which work for profit, but also perform public duties in their role as Recognised Organisations. Their important role cannot be influenced by the economic interests of large companies as that can result in further monopolisation, lack of choice and a price increase, all of which end up raising the costs for the shipowner. Essentially, the independence and impartiality of classification societies helps protect the businesses of independent companies (which means a benefit for shipowners) and ensures that shipowners themselves are treated fairly.
These three solutions would benefit shipowners themselves, while at the same time ensuring the existence of independent manufacturers and suppliers. For more information on the solutions mentioned above, please see the previous articles here.
In conclusion, shipowners are an integral part of the marine industry and in the current economic climate they are faced with numerous legislative changes which, although aimed at protecting the environment, ultimately raise the costs of operating and maintaining the ship. These difficulties can be balanced by introducing changes to the legal framework, allowing shipowners more choice, better prices and an independent and impartial surveying of their ships.
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