The current reality for shipowners
Shipowners are the end-user in the marine engine market and as such, they suffer from shortcomings in the rules and common practice. We want to offer some insight into the issues that shipowners deal with in the fast-paced industry that is maritime shipping.
Who are shipowners?
Shipowners are owners of merchant vessels, who equip and exploit a ship for delivering cargo, people or other services. They do this in exchange for a freight rate, usually either “per freight” or based on hire (e.g. per day). Shipowners can be private individuals or legal entities such as funds and companies that 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 shipowners’ interests 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 difficult for shipowners to retain and grow their business. Legal measures (e.g. 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 fitting scrubbers, switching to low sulphur fuel and investing in zero-emission technology for the future, among other increases in costs.Besides, piracy, economic decline and uncertainty can also take a toll on their businesses, for example, 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 high-quality 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 The current market practice and the outdated legal framework under MARPOL Annex VI affect the independent companies in the aftermarket negatively and allow misconceptions about their quality and services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 benefit from eliminating 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 digitalisation of the industry properly. Digitalisation 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 that 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 other than the engine maker or its affiliates. This trend could drive independent companies out of the market, eliminating choice and competitive prices, and deepening monopolisation. By providing shipowners with the password and the ability to choose who services their engine, they can benefit from a bigger choice and competitive prices.
Finally, ensuring the independence and impartiality of classification societies can also alleviate these issues. Classification societies are private entities that work for profit, but also perform public duties in their role as Recognised Organisations. The economic interests of large companies should not influence their roles. That can result in further monopolisation, lack of choice and a price increase, raising the costs for the shipowner. Essentially, the independence and impartiality of classification societies help 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, while also ensuring the existence of independent manufacturers and suppliers. For more information on the solutions mentioned above, please see the previous articles here.
Shipowners are an integral part of the marine industry. 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 with introducing changes to the legal framework, allowing shipowners more choice, better prices and independent and impartial surveying of their ships.