Ship management's future strength will come from a partnership of equals
Waves of regulation and technology washing over shipping will benefit third party ship management by encouraging closer partnerships between owners and managers
Ship management was traditionally an in-house business. The move to an out-sourced service began in the 1960s, was encouraged when banks took over assets from distressed owners in the 1970s and 1980s, and grew in the heady days up to 2008. Since the financial crash, relations between vessel owners and managers have become strained: management is often regarded as a cost to be trimmed rather than a value to be resourced.
Nevertheless, growth in the sector has continued. From 2,000 ships under management by the top 10 players in 2009, the current top 10 total is about 3,100 ships. The expectation is that ship management will play an increasingly vital role over the coming decade because the trends currently driving the industry will require well-resourced managers with a breadth of expertise and a global footprint that few independent ship owners can match.
The shape and role of ship management in the future was the focus of a Lloyd’s List webinar in August that brought together two senior managers, Anglo-Eastern Univan Executive Chairman Peter Cremers and Fleet Management’s head of Business Division Vikas Grewal, Transas CEO Frank Coles, and International Chamber of Shipping Chairman Esben Poulsson. Although challenges were anticipated from financial short-termism, lack of standardisation, regulatory demands, technology overload, and the need to train both sea- and shore-staff in new ways, all speakers concluded that the key to success in ship management will still be mutual respect from both owner and manager.
“Our relationship with clients has changed over the years,” said Peter Cremers. “Once you get exclusivity, it increases your responsibility and [the relationship] becomes a true partnership.” Both parties share the same goals. “The best thing a ship owner can say to me is ‘My technical department sits [in the Anglo-Eastern offices] in Hong Kong. It’s a partnership, not just a supplier/client relationship.”
Vikas Grewal agreed. Fleet’s long-term relationships in the Japanese market have grown to include 30 owners and 100 ships. “You glow and take pride in exclusivity,” he said. While the additional volume that came with Anglo-Eastern’s merger with Univan brought greater investment for resources, many clients prove hard to convince that a new relationship with a large manager is better than the earlier, established affiliation. Fleet believes a high-profile merger takes its toll on organic growth.
That closeness between owner and manager is likely to be encouraged even more as IMO’s regulatory hurdles call for specialist knowledge and expertise, and as next-generation technology is introduced. Both will demand robust communications links between ship and shore. “Technology will be an opportunity for ship managers,” Esben Poulsson clarified. “Managers face a barrage of new regulations and there’s a mass of technology coming onboard… Embracing technology is a must.”
There’s much more that should be changed to enable ship management to grow. In Frank Coles’ view, “the ship has been seen as the centre of information: that should shift to shore. A shared information system will help to reduce the load on the master.” But the problem is not the crew but the structure of the industry.” Technology alone won’t make for more efficient ship management. “We have to change the infrastructure (such as regulation and training) while adding technology.”
It’s clear it will continue to be an uphill struggle to get ship owners to accept paying a higher fee for management, yet there is a limit to how far managers’ budgets can be reduced if they are to maintain quality management. “You have to draw a line: a minimum required budget,” explained Vikas Grewal. “One tanker being detained affects not only that ship but also all other tankers under that manager.” He added that seafarer competency should not be compromised. “Some things come by experience, not from the classroom or simulator. As crew numbers are trimmed we put in more support on shore.” However, he stressed that there has been no increase in managers’ revenue “in several years”.
The way forward is to optimise the vessel management process for all stakeholders, said Peter Cremers. While the target is not to improve the bottom line, streamlining will bring good results.
Many owners coming into the industry are financial houses, “private equity, hedge funds, investors in privately-listed vehicles,” Esben Poulsson reminded his audience. These owners are very different from privately-held, long-term traditional businesses.
“You need grown-up mutual respect with the manager, understanding his problems. With good old-fashioned communication and understanding, great things can happen”
Esben Poulsson, Chairman of ICS and President SSA
“Management is not just comparing V.Ships with Anglo-Eastern or Fleet to see where you can save a dollar or so. You have to feel comfortable with the value proposition. It’s a long-term business. All this quarterly reporting doesn’t lend itself to ship owning and operation,” Mr Poulsson commented. “You need grown-up mutual respect with the manager, understanding his problems. With good old-fashioned communication and understanding, great things can happen.”
Ship management of the future will invest heavily in next-generation technology and in human resources in equal measure. There will be greater transparency and closer partnership between owners and their managers. However, technology could become a nightmare unless there is a change of attitude within the industry: it would confuse rather than clarify. All speakers agreed that the trend will be towards larger and better-resourced managers, whether through acquisitions or organic growth.
The sector has found itself on a cycle of ‘doing more with less’, but closer partnerships with owners, tighter communications between ship and shore, and investment in both technology and human resources should not only meet regulatory compliance but also bring a much-needed boost to revenue.