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2016 was perhaps a year that seafarers and sailors would like to forget in a hurry. It made soldiers of seamen who are usually navigators and merchants. It was an unusual year in history that marked the coming together of many businesses – mostly shipping lines – for reasons of threat of survival than opportunity to grow. It was a year that tested everyone’s mettle. From shipowners to custom house agents and every little trader who wanted to sell his wares overseas had to be aware of little expenses as no one wanted to lose sight of even a small leak that would sink their ship.
All this because economic pressures continue to compress revenues and profit margins with a growing, underutilised fleet size for almost all shipping lines. While the worst hit by the economic storm was the container class, the bulk, break bulk and oil ones have their woes to tell too. The tanker market was perhaps the only segment that had better stories to share due to a consistent drop in oil prices. Everybody we know of has held on to their resources dearly not swerving much from the budgeted expenses.
But it was as much as year of consolidation and integration as it was of firms losing to the strong current of an unfavourable business environment. With as many as 10 shipping lines choosing to merge or be taken over by their peers, the order of the top 10 ruling the roost was juggled. The outlook, therefore, for anyone in the industry is cautious. There are a few upsides to be happy about in 2017. Bunker prices are expected to stay low and over time, consolidation is expected to bring down the competitive pricing regime where one cuts rates beyond one can handle. Moody’s, the credit rating agency, believes freight rates will remain low due to subdued demand, but that deferred vessel deliveries, cancellations and scrapping will help curb net capacity growth. “After a steep decline this year, freight volumes should stabilize near current levels, with core pricing rising between 2 per cent and 2.5 per cent as a result,” Moody’s said. The tanker sector will still be the one to cheer next year as well.
So the year 2017 will still be about consolidation, costs and capacity highs. Backed by sectoral reform, the Indian industry is currently doing well in the logistics space but western winds continue to impact Indian businesses as well. Low cost and efficiency are still being sincerely courted by all firms in the shipping spectrum. But since New Year is here, everyone is hoping against hope. Anybody can pilot the ship when the sea is calm, but it takes a lot of nerve and steel for one to steer a tight ship. The worst is over in 2016. Profitability may seem out of sight, but we hope your ship will come too laden with all gifts and bounty. In the while, it would be good to use one hand for yourself and one for the ship.
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