When shipping took a down turn in 2008, one of the hardest hit was the containerization industry. Its recovery was excruciatingly slow and even a decade after the global economic crisis, shipping is still suffering as a result of over tonnage and over building from prior years.
Ships are still being sold and companies are still downsizing crews and employees. Hanjin was perhaps the biggest company to have gone bankrupt. A development that shook the global shipping community as it was one of the biggest container company in the world.
To downplay their losses, some of the biggest names in shipping have started alliances and mergers with the end view of refocusing their businesses temporarily. Such companies have started consolidating and selling out vessels and refocusing their businesses from containers to specialized vessels like liquefied natural gasses (LNG).
For Gerardo Borromeo, though, Chief Executive Officer (CEO) of Philippine Transmarine Carriers Inc (PTC), the situation need not be so grim and the country should instead treat this “as an opportunity to showcase the Filipino seafarer’s adaptability and their ability to innovate and to keep up with the constantly changing and evolving face of shipping. This might actually be a new opportunity for us so that we can easily be trained for other jobs beyond just crewing the vessels.”
Japan’s iconic big three, the Nippon Yusen Kabushiki Kaisha (NYK), K-Line Shipping and the Mitsui OSK Lines (MOL) formed a joint t venture on container business called Ocean Network Express (ONE) in 2016.The company started trading under the name One last April 1.
It naturally caused a lot of concern for the Philippines with more than 400,000 thousand registered seafarer. To date, the Philippines is still the biggest supplier of seafarers to the global fleet. The biggest bulk of these seafarers are employed by European and Japanese shipowners.
Borromeo narrates that prior to the 2008 crash, shipping has been enjoying a boom and global growth was unprecedented. This gave a lot of confidence to all stakeholders and when this happens, it also pushes them to spend more. People buy a lot and this isn’t more obvious than in shipping where orders for new buildings of ships have spiked.
This was compounded more by the advent of technology, which contributed to the drastic changes in oil prices leading shipowners to operate more efficiently and producing more products. Thus there was overbuilding and a high rise in orders for more vessels to be built.
He adds, “Confidence is what drives people to drive. Confidence is what drives people to produce and confidence is what drives people to create. In the years leading up to 2007 and 2008 the confidence was so high because everything was growing. China was growing, Greece was growing.
Maybe what we didn’t realize is underneath all of that is something fundamental might snap. This pumping up of investment banks and private equities and all of that has almost turned irrational exuberance. “
Quoting Alan Greenspan, Borromeo adds, “Everybody got so greedy and so hungry that anything goes. Ill buy this and make money and ill buy that and Ill make money. So you are giving people loans on the basis of the value. And were building up and building up expectations but the foundation isn’t so strong.
Banks would buy in the basis of the value but when there is no more confidence the value drop and now if that value drops there will be domino effect and all of a sudden everybody lost confidence and In the process of losing confidence recessions follows. “
Borromeo reiterates that these mergers and alliances of big companies are their way of survival. “ It was a drastic measure but should not really make us think that we will lose job in the long term here. The companies will survive, the ships will continue to sail.
As for its benefits, alliances include delivering better products at lower costs. Companies according to him, now have the ability to deploy large vessels efficiently thereby improving utilization. They can now also be able to provide frequent sailing schedules at cheaper rates.
If there are benefits there are also the downside of such a situation. Borromeo adds, “Well if the chemistry and coordination of the merger is not good, it is not going to survive. It’s something that you want to be in the look out for.
There will be fall out and there might be some people who might be displaced from that. And in that displacement we would have a responsibility to put them somewhere else”.
He believes that “this does not necessarily pertain to seafarers because as long as the ships sail, there will always be a need for people. Its is just a matter of whether they still have the same number of ships.”
Borromeo claims there are approximately 82,000 ships that make up the world fleet. According to him “that’s around 500 deadweight tons and more. There are at least 6,000 or more ships on order between 2016 and 2019. Will that go then to 86,000 or will it remain at 82,000.”
Borromeo furthers that even if the end result of the alliances and mergers might cause displacement, among seafarers, the country’s precious export of labor to the global fleet would not lose out to the changes.
They can rely on the confidence that the population is still growing and would still need shipping to move goods everywhere. Despite the technology that might bring in automated ships there will always be a need for seafarers to man these vessels.
He claims that despite the crisis suffered by the industry, “the remarkable reality is there haven’t been that many seafarers who got displaced. Its not going negative- it’s just slowing down. We are growing and the population of the world is going from seven to nine billion by 2050. People have to eat, and they need cars so there will always be a need for ships.
Borromeo points out that it’s not really these mergers that could potentially be a threat to the employment to seafarers. He believes that its technology that is posing more as the threat.
“Where and how fast these autonomous ships are coming into the system, after 2020 the technology will become more and more available. One consideration that we have to keep in mind is you can build ships in one year but it take years to make a captain “
He believes that the country needs to know what kind of technology are coming in so Filipinos can be prepared with the newest set of skills to man these vessels.
The realignment and refocusing according to him can only mean one thing as well. Companies should be hiring more seafarers with additional set of skills.”
Credits To: Carmela I. Huelar