Data and circular economies in European short seas

Vesa Marttinen,
CEO and Partner,
Yepzon,
Finland

Traditionally maritime economics has four markets. Operations as “eye on the cash flow” shipping activity, while the earnings have been made with correct timing of the asset sale. To create these assets the new building market must yield, and to balance supply/demand the demolition market is the volatile drain. About ten years data market was introduced and some few years ago we started to talk about circular economy as well. Both are justified, having a growth role in maritime. Data market is on one side about optimizing the activity with increased customer satisfaction and sales with e-commerce, social media channels, artificial intelligence supported purchasing behavior analysis etc. More often it is the others part of equation e.g. cost and risk management with optimized operation to decrease operational expenses, smarted designs to speed-up the time to market and reduce financial cost, automated production to cut the capital expenditures and mitigation of business risks with use of machine learning to support decision making.

Circular economy is a way to turn inefficiencies of linear value chain into business value. These should be seen further from traditional waste, and more as underutilization of assets, short lifecycles, questionable materials, amortized end-of-life value, and underutilized market opportunities. In other industries the circular supply chain is already operating. Sharing of cargo space is daily business for intermodal cargo vessels while expansion into cargo units them self and to break bulk market remains. Lifetime extension with converting the assets is underestimated opportunity and recovery of ship systems is also limited. The “as a service” business model has been tested in some countries, so framework so that is already existing.

Above mentioned are seen in basic level at “perfect market” of global deep-sea shipping, where demand is often in hands of American consumers, supply comes from Chinese yards, technology has European roots and scrapping takes place in South-Asia. In European short sea business we have opportunity to lift maritime among lead industries of data and circular economies thanks to high education level, cost pressure, development ecosystem and responsible societies. This corner of the world is the heart of maritime innovation. The local operation can and should take advantage of these new market opportunities. Thus, following the markets in maritime economics in a matrix with data and circular economies. To dive deeper following is few examples of these opportunities.

Moving into data and circularity driven business, we have to appreciate the dynamics and interaction between traditional markets, but at the same time, especially in the European short sea operation, the new approach will be more independent, and disruption happens across old markets. Intermodal cargo operation is a classic example of door-to-door optimized logistics where ecosystem of trucks, ports and ships has learned to operate smoothly. This means that less material and energy is used to accomplish the transportation in the right time. Here the individual cargo units can be tracked for their location, temperature, humidity, and other business critical data. Having said that the fast-moving goods generate higher amount of GHG emissions as the time and predictability is of essence and transportation “gears” are loaded with-in each other causing low load factor for the volume in use. What need to be emphasized is the vital role of maritime ecosystem, with ship owners, ship operators, port authorities, port operators, shippers/cargo owners, agents, authorities, infrastructure services etc. all heading for mutual target. If these same goods would be transported without modular thinking, the material used to accomplish the same transport work would be significantly higher, more empty return voyages with unnecessary use of energy would be seen and form that point of view also the GHG emissions are not saved. Having a shared situational awareness including insight of carried goods and assets is the tool for ecosystem to operate on most responsible way.

Chartering, Sale & Purchase and also conversion market as part of it, finds new opportunities in data and circular economy by valuating exiting assets for alternative mission. With shared capability understanding of existing maritime assets in the market, the time to value creation for new businesses will be very short. Also, the extension of lifetime for underutilized fleet is a valid alterative to save resources into something more valuable. Change of business model from current owner & operator (both by same entity) or owner vs. charterer into “vessel as a service” is not too big of a leap and would bring actors from different maritime markets closer to each other. Here for example a yard and finance institute together with a ship manager can bring vessel for the end-user with less burden. At the same time the public-private collaboration could find new innovative ways of working.

New Building market in Europe has lost its global position from 80% to 5% market share during one generation. The remaining business is knowledge based naval architecture, equipment engineering and operational excellence. There are also some high operational value ship types like yachts and cruise ships, where the value is created by multiple companies with concurrent approach and the entry to this business requires value network with thrust and it takes many decades to create it. Also, much of the supply to the local infrastructure demand is made by Europeans. In a responsible society, we should see that maritime fleet of the future has smart sustainable solutions and use circulated materials. Total environmental and societal impact should therefore be a part of every new project, especially if the public sector is involved directly as buyer, with support to operator or with credit guarantees. This way the demolition market would also be directly connected to new buildings.

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