Shipping in 2017

News ID: 70148

Date: 08 November 2016 - 10:52

Bjørn Kj. Haugland is Executive Vice President and Chief Sustainability Officer in DNV GL Group. In his capacity as CSO for DNV GL group Mr. Haugland oversee DNV GL’s sustainability performance and drive company-wide sustainability initiatives. Mr. Haugland has extensive experience assisting multinational companies in areas such as sustainability, climate change and corporate sustainability and his job is to ensure ethical and sustainable performance within complex global supply chains.Mr. Haugland is board member in StormGeo, WWF, Forum for Environmental Technology, Germanischer Lloyd SE and in SUSTAINIA.

Mr. Haugland started his career in DNV in 1991 and has held various management positions in Norway and abroad. He worked in Korea in the period 1995 to 1997. From 2004 to 2008 he was country chair and responsible for DNV’s operation in Greater China. Mr. Haugland has a M.Sc. in Naval Architecture – Marine Structures and Hydrodynamics – from The Norwegian Institute of Technology in Trondheim and he attended the “Strategic International Leadership” programme at International Institute for Management Development (IMD).

SEAWORD managed to run an interview with him with questions ranging from shipping in 2017 and Chinese economy to the changes in shipping framework merging the shipping lines, MANA international correspondence reported.

What is the outlook of shipping in 2017? When do you think there will be a robust in shipping?

While many ships-in-operation segments are struggling – especially offshore vessels, bulk carriers and container ships –, some sectors are still doing fairly well, such as gas carriers, complex multi-purpose vessels, and most notably the cruise industry.

We foresee challenging conditions to persist for at least the next two years, including slower global economic growth, a relatively low oil price and overcapacity of shipping tonnage. However, in light of the slower order activity which we are seeing currently, this overcapacity should slowly go down. Already in 2015 we saw a decrease of newbuilding orders by 35% (counted in the number of ships) – and this trend has continued in 2016.

The future cover of contracts is very short, with the majority of ships to be delivered in the coming 18 months. Massive slippage and postponements of deliveries reaching 30–45% per annum are also being observed. The lack of new orders could force many smaller shipyards out of the market. We are also expecting major shipbuilders to consolidate in the near future.

Another negative factor for the newbuilding market is limited access to capital. Traditional lenders have become very reluctant to invest into shipping. Only large companies, which can demonstrate strong cash flows, may obtain financing from the banks.

But tough market conditions also present opportunities for DNV GL to assist customers to innovate, standardize and reduce complexity. There is also little doubt that financial, regulatory, and societal pressures will continue to be exerted to encourage shipping to lower its environmental impact. This will result in growing numbers of vessels being designed to offer superior energy efficiency through measures such as improved hydrodynamics, use of lightweight materials, and advanced hybrid power generation systems. New, increasingly effective solutions to reduce water and air pollution will become available. Diversification of the fuel mix should also be expected, with an increasing share of distillate fuels as well as scrubbers for compliance with upcoming low-sulphur requirements. Alternative fuels like LNG have the potential to play a more important role, and grid electricity becoming standard for cold ironing in ports.

When do you think China’s economic downfall will end?

When we look at the world economy and trade, we see still overall growth, but at lower levels. The former powerhouse China is slowing down and imports less goods compared to recent years. This slower activity will most likely continue in the near future. Nevertheless, we are committed to China and will underline this commitment in the future. Our vision is to have a global impact for a safe and sustainable future. To achieve this, we need a global collaboration, including China.

Coming back to the big picture, we expect that worldwide seaborne trade will grow in the long run, but uncertainties due to geopolitics and turbulences on financial markets are high.

Do you think merge plans are the result of downward trend in shipping?

Looking at the recent mergers and alliances especially in the global liner industry, it is obvious that this development is triggered by the persisting downward trend in shipping. As we have seen in many industries before, internationalization and consolidation are normal elements of a maturing process. This is nothing negative.

Do you think mergers are successful in long term?

We would not comment on other companies’ mergers but can only talk about our own merger between DNV and GL in 2013. Looking back, for us the merger was very positive as it allowed us to look at our organization from top to bottom and base the new structure of DNV GL on those projections. We had some restructuring that resulted from having two organizations and could win significant synergies because of that, for example removing functions that were doubled and reducing the number of offices globally.

At the end of this process we have now created more value to customers in terms of a denser and wider network of skilled technical experts and a broader and better set of services. Most notably, we have expanded the responsibilities of our eight maritime regions, with technical support units now based in the regions and enhanced R&D capabilities. While globally we have introduced smart and responsive customer centric services, for example our new customer portal My DNV GL – a single sign-on to all online interactions with DNV GL and DATE (Direct Access to Technical Experts). Located in five support hubs worldwide, DATE experts are reachable 24/7 and are authorized to make decisions within a six hour response time.

Overall, both the slowdown and the merger have really sharpened our focus on our core classification activities. What could be improved? Where could we make changes to structures and processes? How are our customers reacting and where are the markets and sectors we need to emphasise going forward? The results are obvious to see, like our new DNV GL rule set, the introduction of new digital services, new pricing and contracting models

Despite challenging market conditions, we also continue our commitment to invest 5% of our annual revenue in research and innovation projects to help customers become safer, smarter and greener. We are focusing half of these investments on digital innovations and one fifth is dedicated to long-term strategic research.