(Article originally published in July/Aug 2016 edition.)
Ship managers have a lot to offer in terms of service and value. They just have to sell themselves better.
By Sandra Speares
Shipping is clearly going through tough times with markets under massive pressure across a spectrum of sectors. Yet the drive to continually improve safety and operating performance means that the importance of quality ship management has never been greater.
“Ship owners need managers to work more closely with them to meet increasingly demanding regulatory standards, maintain the value of their assets and operate at the most cost-efficient levels possible,” says Captain Norbert Aschmann, CEO of Bernhard Schulte Shipmanagement. “In this respect, opportunities continue to exist for high-quality ship managers such as BSM.”
Geir Sekkesaeter, CEO of OSM Maritime Group, agrees and believes the prolonged downturn currently gripping almost all segments of the market has changed the industry for good: “Yesterday’s successful business models are no longer enough for the new normal of today, or tomorrow. You have to go back a long time to find a downturn of this breadth and scale.”
For Clive Richardson, CEO of V.Group, the parent company of V.Ships, “Remaining relevant is both the opportunity and the challenge for ship managers in the current climate. Increasingly, ship owners are looking for a strategic partner – someone who can be responsive in helping them meet challenges. Importantly, they want that partnership to add value, so understanding the market and being able to deliver innovative solutions drawing on combined knowledge is the opportunity.”
So are ship managers seeing greater demand for their services? BSM’s Aschmann says yes and adds that “One area generating particular interest is our suite of internally developed maritime software applications that provide fully transparent, readily accessible vessel operational and financial information.”
But Captain Kuba Szymanski, Secretary General of InterManager, the international trade association for ship managers, believes the industry needs to do a better job of selling itself and its services.
When times are tough, owners often look to the services of ship managers because they provide better value for the money, Szymanski says. And while this may not be a popular view, he quickly defends it by asking “How many ship managers have you seen going bust during the last seven or eight years? Ship managers are able to pull through the tough and stormy waters while ship owners are not necessarily as flexible. That is the name of the game. Third-party ship management provides a lot of flexibility.”
Ship managers have already spread the risk and are operating with many different income streams. For example, they could be very strong in the crew management segment, or the newbuilding segment, or third-party fuel and technical management, or procurement or a host of others. This kind of diversity means they can cater to the changing requirements of owners, who may have decided to focus on a specific segment.
For example, more and more banks and financial institutions are now seeking the services of qualified ship managers to run their distressed assets, notes OSM’s Sekkesaeter: “The pressure on the market has seen vessels being repossessed and taken on by financial firms that don’t have shipping operations as a core competency. They therefore need external expertise. We can take on that role and help them maximize their returns on assets, offering a complete package that delivers optimal value and operational results for all stakeholders.”
There are downward pressures on pricing, however, as you would expect in a down market. But V.Group’s Richardson says that the management fee is just one part of the story: “Ship owners are looking for partners who can help them bring their operating costs down to a highly efficient, sustainable level so that, when market conditions improve, they will have high-performing assets that allow them to capitalize on improved charter rates. If we perform to that level, we find owners are happy to pay our management fees.”
The goal is to meet market needs by offering new partnerships whereby a comprehensive range of bespoke solutions can be tailored to suit client requirements. These can range from all-inclusive ship management services (including options like fuel consumption) to individual value-added services such as crewing, procurement, accounting and insurance.
Companies like Wilhelmsen and V.Group and Bernhard Schulte are clearly top of the line, but there are also boutique operators who cover a specific niche with services specially designed for a particular owner. The bulk of ship managers handle around 50 ships, says InterManager’s Szymanski. But some owners don’t want to be “a small fish in a big pond” and prefer to have a very tailor-made service from a smaller firm.
Hard times have led to layoffs, salary freezes and even reductions, and a mass exodus of qualified seafarers, and the shortage is becoming acute. Owners are turning increasingly to ship managers to fill the void.
“To meet these demanding requirements, BSM has a wholly owned, global network of 10 ship management, 23 crew service and five maritime training centers,” says CEO Aschmann. “The training centers are equipped with state-of-the-art simulators that play an increasingly important role in the delivery of effective training and continuous professional development. BSM also operates a rigorous and effective cadet recruitment program.”
V.Group’s Richardson says his company invests heavily in attracting and retaining the next generation of seafarers: “We are confident that we will continue to man vessels of all types, even in a tight crew supply market. We have always paid close attention to the placement and development of cadets and now, following our acquisition of Bibby Ship Management in March, we have a dedicated global cadetship program.”
Ship managers’ strongest card is the seafarers themselves, InterManager’s Szymanski believes. He maintains most seafarers, if asked, would say they prefer to work for a ship owner rather than a ship manager, and he believes this is largely because of a lack of information: “If you think about job security, it is far higher with third-party ship managers than it is with owners. Should one owner go bust, a third-party ship manager is able to offer you a job within the same organization on board other owners’ ships.” He stresses ship managers are not good at highlighting this selling point to seafarers.
Contrary to popular opinion, he believes there is no massive shortage of seafarers and the problem is owners who clearly want to create an atmosphere that there is a shortage: “If they can do that, we produce more. And if we do that, they don’t have to increase salaries.” He says his research indicates there have been no big salary hikes as there would be if seafarers were in short supply. This view has been reinforced by the number of requests he receives from crew managers and individuals who present themselves as job candidates because they are unemployed.
While there may be no shortage of seafarers generally, there are in certain key labor markets, notably the Philippines, traditionally one of the world’s most important suppliers of seafarers, Szymanski adds.
Another change in recent years has been the move to outsourcing and diversifying nationalities. In the 1980s and 1990s crew sourcing moved to countries like Poland, Croatia, the Philippines and Ukraine. “Naturally you would expect the technical management to move to those countries as well,” Szymanski says, “because now all your experts are those nationalities.” This has not proved to be the case, however, and – to make matters worse –professionals in those countries do not want to travel abroad and prefer to work in their home countries, close to their families.
Sooner rather than later, he believes, companies will begin to take up this option because market pressures will mean more cost-savings are needed and it will be more cost-effective to open offices in places where the workforce would like to be. Salaries would also be cheaper. “My bet would be more technical management in the Philippines, Poland probably, and the Ukraine,” Szymanski says.
The bottom line is there are plenty of seafarers out there, of any nationality one might want, although they admittedly might be too expensive for some operations and the demand for cheap seafarers of good quality remains.
Szymanski says too many ship managers are shy about demonstrating the benefit they can be to owners: “That is where we could probably be better. There is room for improvement.” – MarEx
Sandra Speares is a U.K.-based maritime reporter. This is her first appearance in the magazine.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.