Ship laying up: Opportunity for Sri Lanka

The vision of the Sri Lankan Government is to make Sri Lanka a shipping hub of Asia and the country is on the verge of realising the long awaited possible and achievable dream. Therefore, port development is not the single option. There are many other related facets to be looked into such as ship building, ship repair, ship ownership, crewing and few other related areas.

At present, the ship repairing and the ship building industries has developed with Colombo dockyards, with Japanese assistance. The rate of development is not in par with the port development to achieve this vision. There are many other untapped opportunities like ‘ship laying up’ in the shipping sector which must be capitalised now.

As the country wasn’t affected much by the 2008 global recession, global ‘shipping slump’ too will not affect the country. The transshipment incidence level handled by the country is enormous. The country handles around 40% of the Indian traffic through other pendulum shipping services. Apart from that, RORO (Roll on Roll off) shipping is increasing rapidly to the MR port at Hambanthota.

Therefore, there is a minimum risk, and the opportunities are enormous to this sector. Since the country has the human resource trained in the country, the sea farer problem too can be solved. Therefore, we need to analyse the strength and opportunities of the sector and conduct a meticulous analysis of the particular fields. Therefore, the Government should look into these opportunities and find out the avenues for the growth of the industry.

As per opinion of most of the prominent ships managers in India, the sea farers’ wages may not get affected. Adversity always has the opportunity and this is true for shipping as well as for all stake holders like owners, ships managers, and sea farers. Sea farers can make use of this time to upgrade their skills, certification and specialisation. Specialisation in dangerous cargo can be taken by those who are in the dry bulk sector. This will give them a better edge.

Today, ships are technologically advanced and the oceans are safer to operate. The females do not join the sea faring trade just for leisure or decent salary. The adventurous instincts of females in the 21st century to face challenges at sea are a growing phenomenon that the shipping industry should adjust and adapt. Few of these aspirants are now poised to take over command at sea and some may have already.

It has been reported that in the mail dominated field of shipping, there put to confront service discrimination. One could say that discrimination begins at the maritime education and training institute where the faculty expresses doubts on women’s capability to withstand the vagaries at sea. Women may have to exert to more than their mail colleagues in the field task. They are always required to prove their physical endurance and ability.

Today an International Labour Organization (ILO) study reveals that women represent 1.2% of the world 1.25 sea farers. The International Transport Federation (ITF) claims that more than 23,000 female sea farers are members of their affiliated unions. Sri Lanka too should think about lady sea farers than thinking of untrained domestic aids which not only damage the image of the country but the culture and the society as well.

Ship ownership

Ship ownership is an essential area in this context. Ownership of ships for a country is very critical, since one core aim is to develop shipping. Therefore, country needs to look into that specific area very analytically and as it is a two faceted business, country has to develop the Government sector as well as the private sector. Therefore, at the outset, the Government should strengthen the shipping Corporation. Shipping Corporation was a thriving industry during its inception in 1966, whereas they positively on the trade with around 20 ships. But at present, Shipping Corporation is badly sidelined in possession of no ships. This is the best time to upgrade this great institution due to the low price of the ships in the world market. Also, the Government must encourage the private sector to buy ships at this important moment and conquer the shipping market at least in South Asia and countries in close proximity since Colombo port tranships 40% of Indian consignments.

The nature of the shipping business is more dependent on prediction, as the ship building takes time. More ships ordered from the yard during the boom period are now adding to the fire of recession in the shipping industry. The supply of ships now is too high with the latest development of ship technology. The boom in commodity prices earlier to financial crisis gave rise to demand of new ships from the yard. These new ships, being delivered now are adding to the over-supply of ships, resulting in very low freight rate in terms of demand for shipping.

The Baltic index for dry bulk is all time low; the baltic dry index is the bench mark indicator for the freight rates. The dry bulk owners are running their ships at a loss. Only cash rich owners are able to sustain the loss hoping that the market will recover. The end of tunnel is still not visible but predicts to start the boom at 2013.

The Baltic and International Maritime Council (BIMCO) is the largest of the international shipping associations representing ship owners, it controls around 65% of the world’s tonnage and it has members in more than 120 countries, including managers, brokers and agents.

The association’s main objective is to protect its global membership through the provision of quality information and advice promoting fair business practices, facilitating harmonisation and standardisation of commercial shipping practices and contracts. Further, they have published the following behaviour graph to identify the situations of the world ships values in a few ship categories. The declining of the ship prices started off with the European Economic recession in 2008. At present, most of the bulk ships have reduced the price around 80% from the initial price. Same time, German companies started selling their ships and chartering them to developing countries in order to keep their registered flags flying. German companies found that unable to provide necessary salaries to German sailors and they wanted chartered companies to employ the sailors of their particular countries. Therefore, this is good opportunity for the developing countries.

During the month of September 2012, some German shipping companies had offered some of their ships to companies in Sri Lanka to fly on Sri Lankan flag with the local crew, this kind of opportunities are booming in the world shipping industry. Therefore, apart from buying ships, this country has to look into training of the sea farers which is a very attractive employment to the country with high salary scale. For example, a ship captain with 10 to 12 years of sea experience may earn more than 10,000 Dollars per month, including all other benefits like paid leave, air tickets and insurance.

A recent report from Clarkson Research Services highlights the effects on investors who have bought ships as alternatives to conventional assets, the price of a five-year-old Capsize (the type of vessel that sails round Africa because it is too big for the Suez or Panama canals) has fallen about 80%, from a record high of US$ 33 million four years ago, is now around 6.6 million US Dollars. The price of large oil tankers has dropped more than 60%, which has a high operating requirement in the South Asian region.

Ship laying up industry

World shipping giants like Maersk are laying up the ships in harbours around the world. According to the reports, 80% of their fleet is laid up in different harbours like Singapore, Hong Kong and Malaysia. This is mainly to create artificial demand of the maritime industry and increase high prices in the freight industry. Therefore, Sri Lanka too can reap benefits in this situation and entering to the ship laying up business as we have one of the biggest natural harbours in the world at Trincomalee. The Trinco harbour has the ability to lay up half of the ships in the world. During the WW II, most of the battle ships were laid up in the Trincomalee Port, which has around 1,630 hectares of water space. At the moment the free space of the harbour is lying free without generating any income.

Seafarers

Sri Lanka possess a reputed flag in terms of the maritime industry, therefore, we have a high reputation to train the sea farers in the country. Flag ranking through meticulous auditing is done by the international organisations. At the moment, Sri Lanka enjoys a high status in terms of the Flag ranking. Therefore, maritime world recognises the sea farers trained and produced by the country. Dalian maritime University in China has conducted a research on the sea farer requirement of 2015, where they found a 50% increase in the demand of the sea farers. At the moment the country has very few organisations to train the sea farers but they produce International standard product, the negative matter is producing the sea farers to cater to the world vacancy requirements. Therefore, the Government should look into these opportunities and find out the avenues for the growth of the industry.

As per opinion of most of the prominent ships managers in India, the seafarers’ wages may not get affected due to the slump. Adversity always has the opportunities and this is true for shipping as well for all the stake holders like owners, ships managers and seafarers. Seafarers can make use of this time for upgrading their skills, certification and specialisation. Specialisation in dangerous cargo can be taken up by those who are in dry bulk sector. This will give better edge to their career in future.

Today’s ships are technologically very advanced and the oceans are safe to operate. The women are not joining the seafaring trade just for leisure or a decent salary. The adventurous instincts of women to face challenges at sea are a growing phenomenon and the shipping industry has to adjust and adopt. Few of these aspirants are poised to take over command at sea. It has been reported that in the male dominated sea, they are put to confront severe discrimination.  The discrimination begins at the maritime education and training institutes, where the faculty expresses doubts on women’s capability to withstand the vagaries at sea. Thereby, women are made to exert more than their male colleagues in field tasks. They are always subjected to endurance test and are required to prove their physical ability. Today, an ILO study reveals that women represent 1.2% of the world’s 1.25 million seafarers. The ITF claims that more than 23,000 women seafarers are members of their affiliated unions. This is the high time for the Country to think about training lady sea farers than thinking of untrained domestic servants which also damages the image of the country as well as the culture and society.

Conclusion

Opportunities are many fold in the sector as buying of ships, getting the higher market of the transshipment in the regular service and as many spill-over effects that can arise like the laying up of ships, employment of sea farers. Therefore, the Government sector as well as the private sector needs to focus on the opportunities to attract the businesses in order to convert the companies to profitable ranges.  Then the shipping network will be efficient and the reality of the shipping hub dream comes true within a few years. The Government too needs to think out of the box as well as on the business perspective in order to find and grab the opportunities, where at same time organisational behaviours and the structures to be re engineered to suit the business behaviours in the shipping sector. Then the three core areas of port, ship ownership and the seafarers can be developed to attract maritime businesses to achieve the Hub status of Asia which is the vision of the Nation.

(The author is a specialist in transportation systems and management. He presently, conducts lectures on the subject for transportation and logistics management degree and masters in CINEC Maritime University. He had published many articles on transportation and management. He presently works at the Central Bank)