March 06, 2009

Armchair Hard Talk

Industry statistics and reports out in the last week or so have confused the hell out of me. Unfortunately, the bikini conceals more than it reveals. I confess to bewilderment, besides disappointment, of course.

On one hand, the Drewry/Precious Associates annual manning report says that there will be a shortage of 33000 officers at sea this year, and that this figure will reach 42700 by 2013. The Drewry analysis says ship owners are offering higher wages and benefits even under present economic conditions in a bid to retain floating staff, and, for Indian officers, a five to ten percent pay hike this year is likely.

On the other hand, Lloyds List says that the number of ships scrapped this year will touch the thousand mark, three times last year’s figures. The World Bank says that global trade will decline for the first time since 1992. Reports indicate that up to ten percent of the global container fleet is on its way to being laid up. People are wondering what to do with the Car Carriers fleet that is badly hit, and talking about using those ugly ships for training or for rock concerts. And Precious Shipping (not to be confused with Precious Associates above) says that a third of the global merchant fleet will be scrapped in the next two years.

I honestly fail to understand how, when businesses, salaries and jobs are being lost across the world, the shipping industry thinks it can survive paying higher wages even as freight demand contracts. Granted that the threefold rise in freight indices in the last few months is a welcome breather for our businesses that had their backs firmly to the wall. Regardless, recent manufacturing and export figures out of Japan and Germany are abysmal. China and India are hardly doing much better, with GDP growth slowing down faster than anticipated. Of course, the US continues to slide even deeper in the mire, bailing out everybody they see around them. Globally, protectionism is rising and trade barriers are more likely.

Trade is contracting, and there is an obvious huge oversupply of tonnage, as indicated by estimates of tonnage bound for graveyards in Asia and elsewhere. I find it therefore hard to believe that the industry expects freight rates to pick up dramatically soon from here on; without higher income, higher salaries seem impossible to justify.

So, my question. Shortage of officers notwithstanding, can the industry afford even present salaries, leave alone higher ones, at a time when its freight income is likely to shrink?

Perhaps some can. After all, those who have not gambled away the huge profits of the last few years on injudicious new buildings and roll of the dice FFA agreements are presumably sitting on cash. As for the others, don’t hold your breath expecting firms to be able to afford even present wages, leave alone higher ones. Some will not survive this cataclysm.

Unless the global economy turns on a dime, and soon, I expect seafarer jobs to be under pressure. I expect a cascading effect of loss of some jobs followed by wider industry layoffs and frozen wages. I expect lower wages in many cases.

While all of this will be beneficial to a segment of the industry, making it more competitive and able to employ a higher calibre of officers for lower wages, seafarers would be well advised to be cautious about their near term future. As they saw in the eighties, what is good for the industry is not always good for them. Some officers, depending on individual circumstances, did not survive in the industry in that recession. For them, it matters little that the operation was successful, because the patient died.

I am a regular client of the BBC’s ‘Hard Talk’ programme. Hard hitting most of the time, it seems to elicit passionate responses from the variety of guests defending their positions. Therefore, it was with some anticipation that I sat down to watch Efthimios Mitropoulos on the show last week. The programme billed him as the “Secretary General of the International Maritime Organisation, the UN body charged with safety and security at sea”. The main thrust of the session? Somali piracy.

During the half hour programme, Gavin Esler asks Mr. Mitropoulos, on a couple of occasions, as I recall, why there cannot be a global move to not pay any ransom to pirates. He asks, quite forcefully (it is Hard Talk, after all) why criminals should be negotiated with, and implies that if there was a UN writ to the effect, the problem of Somali piracy would disappear. Mr. Mitropoulos response was a diplomatic and almost apologetic, ‘We have to consider the seafarers on these ships’ (paraphrased by me). If my memory has not failed me again, I think he repeated this on two separate occasions.

With the benefit of preparation time, perfect hindsight and armchair analysis, this is what I would have told Gavin Elser:
“Mr. Elser, the IMO is in the business of safety at sea, not safety at the cost of its seafarers’ blood. Not to put too fine a point on it, if seafarers on twenty thousand ships refuse to sail through those waters, a large part of world trade will grind to a halt”.

“As for a ‘no negotiating with criminals’ policy, perhaps I would be more sanguine in proposing such an action if the world community did not have a history of negotiating with criminals, even terrorists. Recent developments in Swat bear my hypothesis out. Other examples: Spain negotiating with the ETA, the Oslo peace accords when Israel negotiated with the PLO and your British governments’ backdoor channels with the IRA even after that organisation attacked 10 Downing Street with mortars. Incidentally, Arafat got himself a Nobel Peace Prize. Gandhi did not.”

But that is just me.

In all fairness, Elser also asks Efthimios Mitropoulos why Somali pirates are not being dealt with on land and why the international community is not attacking their bases there.

Good question, that one. Worth waiting for an answer.