With the outbreak of a novel virus, the year 2020 marked itself in history as one of humankind’s most challenging times. COVID-19, one of its kind coronavirus, broke out in a specific region at the start of the year. However, soon it got declared a pandemic and an international health emergency. Countries started taking immediate measures to curtail the further spreading of COVID-19, and the top of the list was social distancing and economic lockdowns.
Apart from the distress, social distancing caused complete lockdowns that severely impacted economic activities. Businesses collapsed, and industries buckled under the pressure of reduced revenues. One such initiative was the traveling and hospitality trade. The shipping industry, however, has performed relatively well up till now under the circumstances. But, needless to say, like every other industry, the shipping trade also has its set of trials and challenges.
Here we discuss the most significant challenges the shipping industry faced in the year 2020:
The Implementation Of Economic, Social, and Governance (ESG) Standards
The shipping industry has to comply with several regulations. These are often environmental guidelines, social laws, or other standards that demand compliance. Some additional rules and regulations may also hinder a shipping business, such as the ones you meet at customs during import or export. These rules consistently evolve and often require hefty investments. Also, tariffs that you have to pay to cross borders if you have to transfer goods internationally. For example, you need to take shipments across the American borders, customs brokerage US companies tend to enable your package’s clearance. They are in affiliation with government agencies and certify the qualification of the import or export.
Let us take the example of IMO 2020. The International Maritime Organization (IMO) regulated the maximum amount of Sulphur content present in marine fuels. They named it as IMO 2020. According to the law, marine fuels could only comprise 0.5% of Sulphur content. It came into effect on 1 January 2020. There are several other regulatory policies such as water ballast treatment, EU MRV, etc. Likewise, the IMO 2050 regulation involves reducing GHG emissions by 50%.
All of these policies are not simple to implement. They often require a substantial amount of technological investments. The projects necessitate a considerable capital outlay, which is often very burdensome for shipping companies. Experts believe that an investment of around $1 trillion is necessary for the research & development, design & construction, transition to a new setup, testing new technologies, etc.
Additionally, implementation of all ESG regulations is also mandatory to convince investors to finance your business. If you survive on borrowed capital, your shipping business must stay up-to-date with all the ESG regulations.
Reduced Economic Activity Threatens Shipping Trade
Undoubtedly, COVID-19 had some drastic impacts on the international economic scenario. Countries that were massively affected by the virus witnessed dire consequences. Similarly, the shipping industry also suffered. Since economic activities were at a low, trading also got reduced. Maritime analysts predicted that the shipping trade would drop an overall 10% single handedly by the pandemic during 2020. The future also looks a little bleak as the pandemic’s second wave now starts engulfing the world.
Experts forecasted that the trade might take momentum once the pandemic slows down. However, it does not seem the case with the second wave of the pandemic hitting the world’s major economies.
Lowered Crew Counts Could Lead To Inefficiencies
Apart from the drop in trading, COVID-19 also restricted human interaction. Consequently, offices and businesses could not work on full potential. Many employees had to work-from-home. In the case of staff who had to serve on the field, only a minimum number of workers was allowed. Shipping companies reduced the number of crew staff shifts, which meant a few employees worked long hours. It was essential since changing crews frequently could increase the risk of COVID-19.
However, crew staff working for long hours also meant an exhausted and tired workforce. Marine experts opine that crew fatigue is a major contributing factor in shipping incidents. They approximate that 75% to 96% of shipping accidents happen due to over-worked employees.
The Latest IMO Cyber Security Rules
In recent years, cybersecurity started gaining quite a lot of significance. With the increased use of the internet, company information systems became at risk of hacking or other privacy breaching attempts. As a result, implementing cybersecurity infrastructures became essential.
Keeping this in mind, the International Marine Organization also passed a resolution that addresses cyber threats. The regulation becomes effective by 1 January 2021, which means all shipping companies will have to follow these rules by then. According to the policy, a ship’s safety management system needs to consider cyber risk management following the ISM code. The code sets down a few guidelines to maintain the safety of the vessel at sea. The authorities have further issued the NIST framework to assist shipping companies in implementing the cybersecurity regulations.
The IMO cybersecurity regulations require companies to perform extensive processes, necessitating a skilled workforce and money. Shipping companies will have to assess the current systems for all the potential risks and threats. Once that gets done, they will have to devise policies and procedures to address these threats. It is a detailed activity and requires skills and efforts to achieve a fully compliant management system successfully.
Shipping Industry Welcoming Newer Digital Technologies
Like every other field, the marine industry is also adopting newer digital technologies. Several modern methods are now accessible for shipping companies to keep up with the changing business environment. One such digital technology is artificial intelligence. The maritime industry utilizes AI to achieve optimum business processes, fleet maintenance, mapping journeys, etc. Moreover, the shipping industry is also looking forward to using robotics for better functioning. Robots can handle the more complex, repetitive tasks and ease the workforce. Also, similar activities such as packing, delivering, maintenance, etc., are best carried out by autonomous robots. It improves overall efficiency.
However, this poses a significant challenge for shipping companies that do not have the expertise or investment to introduce modern digital technology. They can lag and lose on competitive advantage since companies who implement updated skills and knowledge reap benefits through better efficiency.
Conclusion
The business environment is continuously evolving. It means there are always challenges and problems that businesses need to address and adopt strategies to counter them. The year 2020 has generally been a tough year for all organizations and even individuals. The pandemic caused a lot of mayhem, and resultantly, economic activity suffered a whole lot. However, along with the problems posed by COVID-19, the shipping industry faces some particular challenges. Such as the adoption of technology, safety regulations, changing demands, etc. It is best for business owners to stay updated with the challenges their business may have to tackle in the future. The more you know, the better you can equip your business with the necessary measures to address the upcoming challenges.
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