Wartsila, a global leader in complete life-cycle power solutions for the marine and energy markets, sees Asia, where India, China and Korea are important players, as the most dynamic part of the world for the shipping industry. Ole Johansson, president & CEO, Wartsila Corporation, spoke to DNA about the global recovery path for the shipping industry and new shipping trends post the 2008 slowdown. Thursday, 07.Oct.2010, 00:33 (GMT+3)
Wartsila, a global leader in complete life-cycle power solutions for the marine and energy markets, sees Asia, where India, China and Korea are important players, as the most dynamic part of the world for the shipping industry. Ole Johansson, president & CEO, Wartsila Corporation, spoke to DNA about the global recovery path for the shipping industry and new shipping trends post the 2008 slowdown. Excerpts from the interview:
Wartsila recently released a paper named âShipping Scenarios 2030â, which talks of three scenariosâyellow river, open oceans and rough seas. What would be Wartsilaâs strategy to deal with each of this? We need to have a strategy which works in all these scenarios. Regardless of what turn the world will take, energy efficiency and environmental aspects will be important. Obviously, the level of importance will vary with each scenario.
The key factor would be gas, which is used as fuel in the ships. The yellow river scenario is one where China will have certain domination, the rough seas is where we could see trade blocks and barriers and a gloomy scenario for the world trade to some extent. Open oceans will have free trade. Wartsila does not have a bias in each of these scenarios. China is an important player in yellow riverâit will mean trade flows from China, and thus ships designed specifically for such trade flows. In rough seas, transportation would be optimised regionally.
So would rough seas be the worst scenarios for the shipping industry? The answer to this is both yes and no. The positive aspect is that there will be navy ships, there will be ships that are specifically designed for specific trade routes. But I have a hard time seeing a world where we all would isolate ourselves. But to some extent, rough seas would mean more isolation.
Irrespective of these three scenarios, according to you, which part of the world is going to be most dynamic in the coming years for shipping? Wartsila is globally active and we do have a fair idea of whatâs happening across various regions in the world. From the shipping context, the most dynamic part of world is Asiaâ where India, China, Korea are the important players. Europe and United States are little sluggish. In all this, the Chinese trade, their need for raw materials will ultimately have and has already had a positive impact on shipping.
But wouldnât this mean a major dependence on the Chinese economy given the slump we just noticed in the Chinese economy in the past few months? I call the economic slump a blip in the last twenty yearsâ long-term trend. The blip was created not in India or China, but in Europe and United States, which had a negative effect on demand. We now gradually see demand again coming in. We have seen that the shipping industry and the ship building industry globally have been resilient in being able to absorb overcapacity. The ship-owners and shipbuilders found ways to postpone deliveries and to cancel some contracts. The shipping industry has gone into slow steaming, so we need more ships. This all is to deal with what I call a temporary blip in demand. Slow steaming, I believe is here to stay, where we will see ships being operated at slower speed than what it was prior to 2008, when many people were overly optimistic for very high speed, particularly container vessels. That (high-speed operations) may not be the case in the future, with energy efficiency being a major reason, along with overcapacity issues. With the current fuel prices, which are not expected to come down soon anywhere in the near future, I believe we would see slow steamers.
So is slow steaming going to be the new trend with shipping companies? As of now, we are still to see significant orders for slower ship types being placed. Now shipping companies are operating in a state of comprise. So we are yet to see a trend, we would be clear about this trend in this autumn, when new orders are placed. At present, a number of ship-owners worldover are looking at placing orders and have asked shipyards to place quotes. Ultimately, we will see the orders placed and thus understand the trend in the type of ships ordered this autumn.
What would slow steaming mean to shipping companies and customers who will, in turn, have to face a longer delivery time period? For the shipping companies it would translate into energy savings. For the customer it would mean longer travel time. In order to tackle this delay, it is up to the shipping companies to design their logistic pattern smartly. This would also mean there would be more capital (ships) at the sea at a given point of time. The customer will be the key and they are the ones asking for lower rates today. The whole driver here today is that customers are looking for cheaper freight.
While major ordering activity is expected this autumn, has any kind of revival already been witnessed in the orders placed with shipyards post the economic slowdown? In terms of number of orders, in the first six months of this year, orders for around 400 ships were placed globally, that is around the same number of orders placed for the entire 2009. For this year, I expect almost 1,000 ship orders. I am quite optimistic, but we must remember three to four years ago, this number was around 3,700 ships.
So, how does the recovery trend look like in the long term? It will take a while. One thing is ordering ships and the other is delivering ships. I think we will probably not see big orders and thus wonât see order books going up. But we would see a smoother development, where ships are being ordered and delivered over a period of two years without major peaks. It would be a stable recovery.