Often it is seen that when you are forecasting the future of the shipping industry there is a tendency to make two assumptions which are often patently false. The first one is to be overly optimistic in terms of how quickly change might happen. The second one, which is usually seen when talking about timeframes further out – such as 2050 – is to try to imagine new and wonderful innovations that will be shaping that particular future.
In reality, none of those two assumptions are correct. This does not mean that the industry doesn’t change. It actually changes a lot and has been through quite a few disruptive phases such as the shift from sail to steam or the advent of the standardized container just to mention two.
Before looking at what will actually transpire in shipping globally, as well as the impact this will have on the Baltic, it is worthwhile to look into exactly why those two assumptions are wrong as this will also provide insights into how to predict the next few decades in shipping.
Starting with the second assumption first. Not just for shipping, but for any industry, there is a long time for new innovations where they start out as crazy impractical innovations with high price tags until they finally permeate an industry. Just an extremely simple well-known example – the foundations for the internet were laid in the late 1960s, yet mainstream adoption only truly gained traction by the late 1990s. A 30-year lead time. Not because people were overly conservative, but because the technology had to mature, standards had to solidify, business models needed to be developed and infrastructure put in place. This is almost always the same for most innovations. When you are looking for mainstream technology 30 years into the future, don’t use your imagination – look for costly, impractical prototypes which the engineers will then spend years on standardizing and bring the cost levels down.
And herein lies the cue for the first assumption – the timeline. In other industries there is often talk of a “hockey-stick” where a new technology gains a foothold extremely fast. But this is not what we see in shipping. Not because the shipping industry is averse to change per se, but because there are two fundamental aspects which makes rapid adoption near impossible.
The first one is related to the business environment. International shipping involves a large number of stakeholders for even a single shipment. Having 10-20 different companies involved, located in in multiple countries dealing with government agencies in another handful of countries is quite normal. Hence any new development, no matter how good, needs to be adopted by a large number of diverse stakeholders at the same time. It is not like selling a book on Amazon where it only required one stakeholder – the consumer – to change his behaviour.
The second aspect is the legal framework. The rules governing shipping has developed literally over centuries. The Bills of Lading which forms part of the commercial foundation date back to the late 1800s. This clearly does not make them perfect – but from a lawyer’s perspective brings something extremely value, namely legal precedence. Any attempt at a commercial engagement outside this framework is of course possible, but immediately raises the commercial risk as the lawyers then no longer know the extend of the liabilities incurred. Then there are all the safety and security rules in for examples SOLAS. Also painstakingly developed over decades and ratified over just as extensive a timeframe. Any new innovations either not covered by, or in violation of, these rules will have a long adoption period while the legislation at IMO catches up.
And this then brings us to the question of what is in store for the industry in the coming couple of decades. We are already now beginning to see the unfolding of aspects that have underway for a while. For the container shipping lines, they have been through a 20-year period of consolidation and for the global carriers they have finally arrived at a degree of concentration where they are becoming an oligopoly. For the smaller regional lines, this will take a few more years – but it will be coming. This is the natural response to the commoditization of the industry.
Digitalization is beginning to gain traction. The first attempts were made in the early 2000s but without much success, but now the ball is indeed rolling – but as many stakeholders need to buy into the new tools, adoption rates will be low – but a full penetration of these are likely to be completed in the second half of the 2020s.
Looking further out, the key element is environmental performance – or more correctly, energy consumption. The ultimate goal is to become independent of the energy source – which requires the ability to store energy onboard vessels in the form of for example fuel cells or similar technologies. The first very small electric test ships are already entering into service, and the technology cannot yet power the large cargo vessels – but with a 30-year lead time, it is very likely that by 2050 we may indeed be seeing a Baltic region where all shipping is done with zero environmental impact.
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