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What are the major challenges faced by the shipping industry?

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major challenges faced by the shipping industry

In an ever-changing world, the shipping industry has to face new challenges. If the one related to the impact on the environment is the biggest topic discussed, other subjects also lead maritime sector professionals to adapt quickly.

This is the case with digitalization and the implementation of new equipment, the issues related to politics, or the management of human resources. To secure the future of the maritime field and logistics, companies must manage all the aspects of these challenges and be able to find sustainable solutions.

1 - Environmental Regulations

Air Pollution

Exhaust gases produced by vessels release into the air various particles including nitrogen oxides (NOx), sulfur oxides (SOx), carbon dioxide (CO2), and particulate matter. They have an impact on climate and also on public health. Marpol Annex VI already imposed limitations but the International Maritime Organization (IMO) tightened its requirements with a reduction of GHG emissions by at least 50 percent by 2050.

Following this announcement, shipowners have started the decarbonization of their fleets. It can be achieved through the use of digital technologies, alternative fuels, and retrofitting.

Underwater Noise

A ship sailing on the seas is a source of underwater noises due to its engine, propeller, and hull form. They disturb the natural acoustic environment and marine mammals are sensitive to these modifications. Their ability to communicate with other animals is reduced and their migration and reproduction capability can be impacted.

Guidelines issued by IMO provide maintenance recommendations and encourage shipowners to optimize ship designs to reduce pollution. As of now, firms are invited to apply them on a voluntary basis.

However, with the multiplication of shipping lines in the Arctic, environmental groups request mandatory regulation. The world’s fleet could be asked in the future to have a specific class notation or an approved noise management plan onboard.

Water management a challenge faced by the shipping industry

Ballast Water Management

With the entry into force of the Ballast Water Management (BWM) Convention in 2017, vessels have been requested to comply with D1 or D2 standards. D1 allows ballast water exchange within open seas at more than 200 nautical miles from land, and in seas more than 200 meters deep. D2 involves the installation of a ballast water treatment system to meet the amount of viable organisms’ discharge limitations.

Its goal is to avoid the introduction and spread of invasive marine species. Amendments to the Convention adopted in 2018 establish a schedule to delete the D1 standard. Ship operators have to ensure that their whole fleet is only compliant with D2 by 8 September 2024.

2 - Digitalization

Artificial Intelligence (AI)

The maritime industry is currently leaving a digital revolution with the introduction of AI. Its use by logistic parties offers many benefits like the reduction of port congestion or the better coordination and security of transportation. AI can also be implemented onboard vessels for predictive maintenance.

The collection of data provides information on potential failure and the crew can undertake corrective actions. The return on investment following the implementation of this technology is high and it improves the efficiency standards. This is notably the case for the management of fuel consumption. AI can be a useful decision-making tool for voyage planning as it helps with route optimization.

Internet of Things (IoT)

IoT objects are widely used for tracking. Digitalization benefits freight forwarders for logistics as they receive accurate data on shipments and they improve customer services. Smart containers are equipped with IoT sensors that are able to record the temperature and humidity inside these metal boxes. They are crucial information for perishable foods or pharmaceutical products.

In case of litigation at the reception of goods, the measures collected are analyzed to identify the cause of possible damage. The reception of live notifications regarding the location also allows the logistic parties to make arrangements in case of disruptions.

Autonomous Vessels

The arrival of autonomous ships on our oceans is not in a distant future. On January 2022, the Nippon Foundation successfully carried out the sea trials of an unmanned coastal container ship between two ports.

The rapid development of technologies conducts IMO to start discussions for the creation of a Maritime Autonomous Surface Ships (MASS) code. The deployment of this type of vessel implies the creation of new directives to ensure the safety of their operation.

However, this innovation remains a technical challenge, especially in terms of reliability. Sensors must withstand the marine environment and provide accurate data without interruptions.

digitalization with autonomous vessel in the shipping industry

3 - Politics

Geo-political Tensions

Rising geopolitical tensions in different parts of the world impact the security of the shipping industry. These conflicts cause disruptions in ocean trade routes and port activity.

Following the pandemic, the war in Ukraine started and some vessels operating in the Black Sea were trapped at anchorage or at berth. The supply chains of goods had to be modified which caused an increase of commodity prices. This situation has also amplified the crew shortage. Russian and Ukrainian seafarers can be blocked to reach the port or unable to disembark to return home.

Over-regulations

The shipping industry is facing an increasing number of restrictions in particular with regard to the environment. They are not only issued by IMO but also by many countries which imposed their own directives. National rules can sometimes be more restrives than the one implemented by IMO. For shipowners and operators, this may result in additional costs. The industry is under pressure to reduce carbon intensity by at least 70 percent by 2050.

However, consumers are pushing for even more stringent objectives. The Cargo Owners for Zero Emission Vessels (coZEV), an alliance of major multinational companies, wishes to reach the goal of net zero by 2040.

ESG

Environmental, Social, and Governance (ESG) criteria is a set of standards used by some investors to assess a company’s behavior for the management of sustainable and ethical topics. A business that implements an ESG strategy and issues regular reports shows its desire to be transparent about its actions.

Financial actors look more and more at this indicator to decide on their global investments. The adoption of ESG practices within the shipping industry is directly linked to the new targets related to decarbonization. It will become an essential tool and help to remain competitive and attract new shareholders.

4 - Rising Costs

Ocean Freight Rates

The transport of goods to the other side of the world is the highest cost in logistics. With the increase in fuel prices, the rate of ocean freight has been re-evaluated upwards. This has a significant impact on the final price of goods for consumers.

To follow the evolution of transport rates, the Baltic Exchange organization provides freight market indices. For example, the Baltic Dry Index (BDI) is updated daily and gives the prices for the transport of dry bulk cargo.

Newbuild Prices

The price of building a new ship is determined by shipyards based on supply and demand. It fluctuates according to several criteria :

  • Prices of raw materials particularly steel.
  • Exchange rates.
  • Labor costs.
  • The growing number of orders and the shortage of available docks.

 

For ship operators, the final invoice for a ship is also increased with the implementation of new technologies and equipment to comply with regulations. They require additional skills and more technical studies for their integration onboard.

one of the major challenge for the shipping industry is the safety on board

5 - Security

Piracy

Piracy is still present in some regions of the world, notably in the West African Gulf of Guinea. The two main objectives of the attacks are the theft of cargo or the kidnapping of the crew for a ransom. If global piracy has declined, ships are still subject to armed robberies. Before transiting in these sensitive areas, the crew must be trained with an anti-piracy drill and the appropriate risk assessment must be implemented.

Cyberattacks

The supervision of the transport of goods is now done with computers and the Internet for the automation of tasks. This digitalization made it vulnerable and prone to cyberattacks to steal confidential data.

Vessels can also be affected due to the presence of connected navigation equipment. They can be the target of hackers who can take control of the ship. To support shipowners, IMO provides recommendations in its guidelines for cyber risk management.

6 - Real-time Tracking

The live tracking of containers has become essential for logistic parties. The visibility of the supply chain is increased thanks to the reception of these accurate data. They are used to manage the transit of shipments by anticipating unforeseen events. Demurrage and detention periods are decreased but also their costs.

In logistics, efficiency is based on the cooperation and coordination of all the stakeholders The parties must communicate with each other on the different transportation steps. With tracking platforms, everyone is informed at the same time of all the events. The risk of human error in sharing information is reduced and the traceability of goods is improved. 

For a company, a reliable tracking system is an important investment. Its implementation also requires time to adapt but in the end, the optimization of their operations is enhanced.

one difficulty in the maritime industry is crew shortage

7 - Human Resources

Crew Shortage

The shipping industry is having difficulty recruiting young talents. A career at sea does not attract the new generation for several reasons. Firstly because of the difficult working conditions. Seamen are exposed to harsh weather, they are in a hazardous environment with a risk of accidents, and they can have to work long hours.

Secondly, they pass several months away from home. Internet and telephone access is limited, therefore communication with family and friends is broken. This situation can lead to a feeling of isolation and disconnection.

Employee Retention

During the COVID-19 pandemic, crew changes were canceled, seafarers stayed longer onboard, and they were banned from shore accesses. Following this crisis, some of them have re-evaluated their career and have taken a new professional direction. It is also the case for cadets and trainees. Academies and training centers had to close their doors and students did not benefit from an optimal experience at sea.

This period may have made them change their mind about their future and think of a new orientation. That’s why companies are now working on strategies to promote the advantages of sailing and the possibilities of career evolution.

Lack of Technical Knowledge

BIMCO and the International Chamber of Shipping (ICS) issued 2021 their Seafarer Workforce Report. They noticed a lack of officers with technical experience on specific vessels like chemical or crude tankers and on management levels. The situation is likely to worsen in the coming years as they predict a need for 89,510 officers by 2026.

The report also warns that with the implementation of technological innovations onboard, a variety of skills will be required to operate the world’s fleet. The crew will need additional training to manage these changes safely.

How the shipping industry can overcome these challenges?

Companies can make the seafaring profession more attractive, particularly through the development of digitalization. The time saved by the automation of certain tasks can be used to improve the training and welfare of the crew. It is also the solution to reaching the objectives of new regulations with the record and analysis of data.

The Sinay Hub is based on AI and helps the shipping industry with these issues. It can be personalized to meet specific customer needs. Logistics modules provide accurate and real-time data on multiple vessels to follow freight. ETA prediction services are used by shippers to anticipate delays and improve the efficiency of the supply chain. A route optimization app can also be added to control fuel consumption, as well as modules to monitor air quality, water quality, aerial noise, underwater noise, or underwater life. The system provides automated reports to ensure compliance with IMO targets. 

In order to assist the clients to build their own tools adapted to their company, Sinay proposes an Application Programming Interface (API) catalog. These powerful APIs are flexible and can be customized for simple or more complex demands. Their implementation is simple and fast regardless of the developer’s level. Whether it is to control GHG emissions or to track a container, APIs are essential for better operations management.

With this wide range of solutions, Sinay is able to support maritime actors in their digital transformation.

Conclusion

The challenges the shipping industry faces are coming from several fields and are always increasing. To deal with them, the reinforcement of cooperation between stakeholders is the key to securing and ensuring the prosperity of the ocean transport market.

Frequently Asked Questions about Challenges in the Shipping Industry

1- Environmental Regulations

2- Digitalization

3- Politics

4- Rising Costs

5- Security

6- Real-Time Tracking

7- Human Resources

The shipping industry is actively working to comply with environmental regulations.

Shipowners are implementing various measures, including the use of digital technologies, alternative fuels, and retrofitting to reduce greenhouse gas emissions.

Geo-political tensions can disrupt ocean trade routes and port activity, leading to supply chain modifications and increased commodity prices.

Over-regulation, both at the international and national levels, adds additional costs and complexity to the industry.

Environmental, Social, and Governance (ESG) criteria are becoming important for investors, influencing companies to adopt sustainable practices.

The shipping industry faces a shortage of skilled crew members, particularly among the younger generation. Difficult working conditions, long periods away from home, and limited communication options contribute to the lack of interest in pursuing a career at sea. 

The industry also faces a lack of technical knowledge, especially in specialized areas, which requires additional training and recruitment efforts.

Digitalization is revolutionizing the shipping industry in multiple ways. Artificial Intelligence (AI) is being utilized for predictive maintenance, route optimization, and fuel consumption management.

The Internet of Things (IoT) enables real-time tracking of shipments and provides accurate data for logistics and customer service improvement.

The development of autonomous vessels is underway, although technical challenges remain to ensure their reliability and safety.

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