• Thursday 20 May 2010
• by Tom Leander

How dire will the situation become?

PRADEEP Chawla gave a passionate call last week on a familiar topic: the crewing shortage. Capt Chawla has a direct view of the problem. He is the director of quality assurance and training for Anglo-Eastern Ship Management Services in Hong Kong, one of the largest such companies in the world.

So how dangerous is this gap — and how will it look as the world emerges from the economic crisis and beyond? Efforts to project seafarer supply and demand emerge regularly. A new study by the Japan International Transport Institute and the Nippon Foundation has just emerged. A highly anticipated five-year study by the International Shipping Federation and BIMCO is due later this year.

The element to watch in these studies is how the unexpected elements of recent history have affected what was previously taken to be a major shortfall in seafarer supply.

Conventional wisdom has it that the economic collapse in 2008 and collapse of trade following the shock of Lehman Brothers altered the demand and supply scenario in ways that proved to be a palliative to the crewing crisis.

During the boom years earlier in this decade, shipowners enlarged their fleets but the entry of qualified seafarers into the picture could not keep up with demand. By 2008, the lack of seafarers, especially officers with competence certificates for commercial fleets, became significant and their wages shot up.

The effect of the last five years has not yet been gauged by the BIMCO and ISF study. But despite the shortage of qualified seafarers seeming to be a perennial irritant, the results of the last two studies presented a surprisingly underwhelming problem.

The 2000 BIMCO and ISF manpower study estimated that the number of officers in the global commercial maritime fleet was 404,000 against a demand for 420,000 — implying a deficit of 4%. By 2005, the situation had improved, according to the study, with 466,000 officers against a demand for 476,000 — with a deficit of 2%. Ratings were in plentiful supply. In 2000, supply was 823,000 and demand 599,000. In 2005, those figures are put at 721,000 and 586,000, respectively.

Nevertheless the perception of a major shortage ruled by 2008, and because of the industry’s ordering binge, cries of an impending crisis emerged. A study by Drewry Shipping Consultants, ‘Manning 2009’, published in February of that year identified officer supply in 2009 at 517,000, a rise of 11% since 2005 and 28% since 1990. One third of the officers in 2009 were Asian — led by China, the Philippines and India — while eastern European officers represented one quarter of the total. Drewry estimated the shortfall to be numerically much higher than that reported by the ISF and BIMCO in 2005, at 33,000.

At the time, Drewry used a Global Manpower model, compiled with Precious Associates, to project that officer supply will rise to 573,000 by 2013. Drewry saw the officer deficit as rising to 56,000 by that time. It allowed for 10% newbuilding cancellations and a 10% rise in scrapping, and then adjusted its shortfall figure down to 42,700.

The latest entry into this numerical sleight of hand is JITI and the Nippon Foundation, which released a study last week entitled ‘The Future Global Supply and Demand for Seafarers and Possible Measures to Facilitate Stakeholders to Secure a Quantity of Quality Seafarers’.

This study makes no prediction of a current shortage, but starts with an estimate of demand as a base to project future shortages. This base extrapolated by taking the number of ships in 2010 — at 35,623 vessels — applying standard crewing numbers to particular vessel types. For example, 8,000 gt liquefied petroleum gas chemical and product tankers require four deck officers, five engine officers, five deck ratings, five engine ratings and three catering ratings, for a ship total of 22 seafarers. Applying this to all sectors, from very large crude carriers to containers, and assuming a backup ratio of 50%, they pegged the current demand for officers at 445,055 and ratings at 648,914.

The JITI/Nippon Centre study does not give figures for current supply. Its calculation of current demand is used as a base to project demand through 2020 for both officers and ratings.

Its numbers are interesting in comparison to the Drewry figures, keeping in mind that the two studies cannot be held up to each other as like-for-like.

The JITI/Nippon Foundation study would imply that the situation now appears less dire than it did in early 2009, when Drewry was using numbers based on the previous year, in which the crisis had not fully unfolded. Having established the base of demand for 445,055 officers and 648,914 ratings, the JITI study calculates a steady arc of increasing demand, given conditions in the current market which it applies to its methodology. It sees demand climbing to 3.5% above its stated current levels for both officers and ratings by 2015, representing 15,796 officers and 23,032 ratings. By 2015, that gap will have doubled to 7%, representing 32,153 officers and 46,881 ratings.

Drewry’s reckoning of demand — and its consequences for a shortfall — was more severe, seeing a 7% deficit already emerging by 2013, even as it accounted for 10% cancellations and 10% scrapping.

So what, in the course of a little more of one year, has changed, according to JITI?

One element is JITI’s view of global demand. JITI compared the average gross domestic product growth of the world economy from 2001 until 2010 in five year averages, and sees a 14% decrease of annual GDP between the first five-year segment and the second. It establishes the five year average rate in the number of vessels in the world fleet between 2000 and the end of 2004 at 0.8%. It omits a calculation of the five-year average growth between 2005 and the end of 2009 — perhaps because of the extraordinary nature of the economic collapse that occurred at the end of the period makes for too much of an outlier effect.

Eventually, the number it plucks for growth of the world fleet between 2010 and 2020 is 0.7%, a figure which takes into account expected long-term decrease in real GDP.

Nevertheless, it has this to say about the total effect of the global finance crisis on commercial fleets: “It was evaluated that the influence [of] the financial crisis on the transition of world commercial fleets was slight as a whole for a few years.”

This bears out in its view of scrapping. JITI says that the usual number of scrapped ships runs at between 200 and 400 per year. In the extraordinary 2009, the number of scrapped ships reached 947 — a figure that it says is just one third of the number of ships newly put into the market in 2009. Therefore it reckons that the influence of ship scrapping as the world emerges from the crisis “is not large”.

Equally sanguine is the report’s view on cancellations. It notes that the effect of cancellations has not appeared in the market. “A large portion of the cancellations is related to ships of provisional holding, which does not affect the actual trend in the number of world commercial fleets,” the report says.

“Usually shipowners would hesitate to cancel formal shipbuilding contracts because such cancellations could cause a big penalty on the [side] of the shipowner, which costs almost the same as the price of a new ship and/or makes the relationship with shipbuilders worse.

“Therefore the influence of cancellation for a few years’ term just after the crisis to the number of the world commercial fleets is not large.”

The study notes, too, that lay-ups were a factor at the beginning of the crisis, but now that global trade is improving ships are being taken out of lay-up. “Although the number of ships in lay-up is usually around 200 and has increased to 1,500 since the middle of 2009, the market conditions are rapidly recovering so that the number of ships in lay-up will decrease and approach the usual number in the future,” it says.

It also discounts the effect of slow steaming, saying that the number of ships in operation does not change substantially under the slow steaming scenario.

Wrapping all these conclusions together, the study establishes an increase by 2020 of 2,574 vessels in the world commercial fleet to 38,197, compared to current levels.

These calculations of demand are matched with assumptions of supply. Among them is that supply of seafarers from Asian nations in particular will continue, while the attraction of a life at sea by traditional shipping countries will follow a trend of decline. Hedging its bets, the study declares that “supply of seafarers is tightly associated with the scale of the world fleets, which is linked to the world economy’s climates”. It adds: “It is very difficult to anticipate that the supply will [rise] over demand unless rapid diminution in scale of world commercial fleets continues for several years.”

 
Will global supply of seafarers meet demand?

 
JITI’s tour of projected global demand, while interesting, establishes once again that such projections are at best speculative. Each of the economic assumptions could be argued another way. Is the global economy, for example, returning to steady growth? The violent reactions in global markets — including China’s stock market — to the European Union’s debt woes could indicate a double dip to the world’s recovery.

The view of cancellations flies in the face of recent news from China Association of the National Shipbuilding Industry president Zhang Guangqin that up to 100 ships will be cancelled this year.

Finally, the study assumes that the crewing shortage that preceded the global financial crisis has been mitigated by the downturn as demand collapsed last year. If so, what are we to make of the cries from those such as Capt Chawla, which seem to confirm that a shortage of qualified and motivated seafarers has reached an untenable level?

JITI probably took the right course in its conservative estimates and middle-of-the-road assumptions. But since an actual reckoning of long-term seafarer demand still appears to be an impossible art, shipowners and regulators would do well to heed the voices of experience from the arena of bridges, decks and engine rooms.

A JAPAN International Transport Institute and Nippon Foundation study sees a steadily widening demand for seafarers, with a deficit of 7.2% for both officers and ratings emerging by the year 2020.

Its calculations on demand include a modest growth of the global fleet and a minimal effect of cancellations and scrapping coming out of the economic crisis.

Other studies have pegged the impending shortfall as more severe.

Sumber : https://www.bimco.org/Corporate/About/Press/BIMCO_in_the_Press/2010/05/20_Seafarers_in_short_supply.aspx