Disruption of the Greek business model
Recession in shipping is blamed partly on oversupply of vessels. When you look at number and tonnage of existing ships and the new-build orders, one finds Greek owners are front runners in both areas. But then one wonders why they want to add to the glut with new-builds when they already own so much floating tonnage.
The Greeks have historically been adept at riding the shipping market cycles. Their traditional business sweet spot has arguably not been maritime transportation, but maritime asset play. One can perhaps conclude that they have perfected the art of buying ships cheap, while selling them high. Majority of ship owners ride out the downturn by waiting for market recovery & capital appreciation of vessels by trading them on spot voyages or short-term time charters.
Those who have been in the shipping industry long enough even have a certain level of confidence on their ability to predict the length of these cycles. To give them full credit, most of them have done extremely well so far and have capitalized well on the past and the current Status Quo. The number of Greek ship owners, and the number and tonnage of ships held by them is testament to that.
One of the primary reasons for oversupply of tonnage has been:
Inability to predict trade volumes and transportation needs
Time it takes to build a ship from design to delivery
Widespread existence of middle men involved in almost every transaction
New regulatory pressures
Lack of visibility across the global supply-chain
However, things are set to change with digitalization of the maritime industry. Communication and connectivity is enabling not just data driven visibility for monitoring vessel operations, but also provides unprecedented level of insight by merging various sources of data. For example, overlaying and analysing diverse sources of data such as weather, AIS, trade lanes, commodity prices, voyage performance, port congestion, inland logistics, cargo demand and supply trends, fuel prices, etc, give an unprecedented level of insight that was not possible in the past.
The outcome, spiked by maritime digitalization means:
No place for middlemen, who are traditional gatekeepers of information
Greater awareness of global trade, visibility of supply-chains and growth forecasts
Coordination between ships, ports and inland logistics hubs, permitting JIT operations
Real-time transmission and analysis of secure data, preventing possible manipulation
Global transparency, everybody sees everything at the same time
When marrying data in real time, at the granular level, it allows for vessels to arrive port just-in-time, with the optimum amount of cargo, at the highest level of operational efficiency and at an overall optimum cost across the maritime supply chain. But at the macro level it also permits far better demand forecast of maritime transportation requirements, which in the past was a massive blind spot. Barring for cases of Force Majeure and political trade wars, which nobody can really foresee, it becomes quite easy to simulate vessel demand requirements in advance.
Increased level of transparency, visibility and predictability is expected to bring about disruption in the way shipping cycles are generated and how they can be ridden. Having a vision of the cargo demand makes it possible to visualize the demand for ships. With better understanding and calculation of probable outcomes in a digital world, the past advantage of buying low and selling high will eventually be lost. Maritime asset play may no longer be a viable business model, not just for the Greeks but for the rest of the world as well.
Let me know your thoughts.
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