March 08, 2012

Why Indian seafarer jobs are at greater risk today

The problem with trying to figure out how badly Indian seafarer employment is likely to be hit by the present slump in shipping is compounded by methodological issues with respect to the absence of any reliable, accurate or timely statistics on seamen of the kind easily available in most Western countries and the Philippines. That aside, Indian mariners face other existential threats today; a dwindling share of a job market that is likely to shrink considerably in the near to medium term is one of them. Likely moves by owners to cheaper nationalities and crippling structural issues to do with the education and intake of new seafarers in the country are others.

The global economic meltdown shows no signs- despite recent encouraging numbers from the US that hint of a recovery- of easing. The largest economy in the world, with its massive debt overhang, may have postponed the inevitable, but Europe's day of reckoning is here: the Eurozone will shrink by 0.3% this year, the European Commission now says- it had predicted a growth of 0.5% just three months ago. Not just Greece, but Portugal, Belgium, Spain, Italy, Cyprus, the Netherlands and Slovenia have now been added to the EC's list of countries that will see a contraction. 

Asia is far from immune. The World Bank's recently warned that sweeping economic and political reforms were needed in China. Said Robert Zoellick, World Bank president, bluntly, “As China’s leaders know, the country’s current growth model is unsustainable.” Analysts are warning that the world's second largest economy is running out of steam, and that, even if reforms were implemented, its growth will decline to 5.9% by 2021, and 5% in 2026. Despite this, China will be the world's biggest economy by 2030, but the 10% growth rate days may be over for the export-dependent and investment-led economy. 

Other less important countries- like India with its domestic consumption story of hope- are also slowing down. The Indian economy has just posted its slowest growth in three years, and may end the year closer to 6% than 7% GDP growth. That is more than a one percent drop from the forecast less than a year ago; analysts say that translates into a shortfall of over ten million jobs. With dozens of State elections and a general election due in the next two years, high chances of populist financial imprudence from a government that seems to be in a state of paralysis means that the economy is unlikely to be a priority. 

Amazingly, in the midst of this doom and gloom, some international ship owners seem hell b
ent on adding to their own woes. Despite persistent and universal warnings against newbuildings and seemingly oblivious to the existing massive tonnage overhang, many of them are still booking orders at shipyards to take advantage of present low prices. Small wonder that industry analysts expect more defaults with heavy debt and low freight rates combining to devastating effect. This, when leading consultancy companies are warning that the shipping industry will not see any respite for at least a couple of years. I think it will be longer. Even much longer, unless the present orderbooks for newbuilds suffer significant cancellation. Not good news for jobseekers.

Increasing Chinese domination of the global economy will be a negative for Indian seafarer job prospects, because this will likely be accompanied by a demographic shift of tonnage ownership to China. Chinese crews will dominate on those ships- they are already a significant source of manpower in Hong Kong and Taiwan. Owners have so far chosen, for many reasons, not to mix Chinese crews with other nationalities; As Chinese crew numbers go up, Indians will lose out on Hong Kong flagged vessels in the future.

Japanese and European shipowners continue to show a marked preference for Filipinos over Indians. No doubt, the fact that the quality of product from India has declined has much to do with it; it is hard to justify higher wages with uneven performance. Nonetheless, increasingly strengthening links between countries in the EU and the Filipino maritime machine- despite the threatened EMSA boycott of Filipino certificates- is an ominous development for Indian seamen. It is clear that Europe is betting on Filipino officers in the near future; EU member States are putting resources in the Philippines to improve quality of their officers- whose numbers are growing, unlike in India. 

As just one example, 176 Filipino officers recently completed training in a joint project between their nodal seafarer agency DOLE and the Netherlands. In comparison, although quite a few shipmanagement agencies have set up their own training establishments in India, I remain unconvinced that the calibre of the output is significantly higher than that of the Philippines that is producing far greater numbers of tomorrow's officers.
Norwegian owners Gearbulk announced last week that they will lay off all European seafarers on their ships and replace them with Asian crews. This trend may well accelerate, and it will be interesting to see how many of these jobs will come to Indian officers and Ratings. I am guessing not the majority. 

A shrinking job market, the advent of giant ships and a paucity of training berths are factors that affect seafarer jobs regardless of nationality and contribute to a decline in overall demand.  (A Valemax carries twice or thrice the load of even a large bulker and 18,000 TEU boxships are coming out in numbers; remember 6000 TEU ships were considered huge not so long ago). Along with the consolidation and route collaboration between large companies as they fight market conditions, this will reduce the number of oceangoing ships in future, with a corresponding decrease in overall jobs. In this scenario, consistent preference for non-Indian crews (or East European and, who knows, the Chinese or even Nigerians tomorrow) may well strike another blow to an Indian seafarer's job prospects. 

No doubt, experienced senior officers will remain in demand for a while, but perhaps jobs will start drying up at the junior officer level. It is logical anyway- when Ratings and Cadets struggle to get training berths even after paying about a fifth of a million rupees to touts, where will the junior officers come from? Moreover, what will be the calibre of those who do?

That said, I think there is good reason to be cautiously optimistic about some sectors.  The Liquefied Gas market, for example. Rates for large LNG tankers have doubled or tripled than a couple of years ago, creating stellar profits for owners and making this the most profitable sector in shipping. Norwegian Investment bank Pareto recently said that an additional 352 LNG carriers could be needed- globally by 2020, because of the consequences of the Japanese earthquake last year and increasing regulatory and industry stress on the environment and cleaner fuels; Japanese LNG imports are up 28% YOY, and Chinese imports will be up 42% this year. Even in the short term, Stena Bulk has said that as many as 70 LNG tankers will be required by 2014. It looks almost certain that experienced gas carrier crews will be somewhat insulated against job uncertainties for sometime. I would advise any young officer to try to get good experience on these ships today.

The offshore sector will likely do all right too, including in India. With a sedimentary area of 3.14 million square kilometres where most of its hydrocarbon reserves lie, this oil thirsty country is already seeing much expansion into this sector from mainstream shipping companies and others as exploration is being intensified. The demand for oil will not go away in a hurry; new vistas are being exploited across the world, from the US Gulf to the Arctic, in Africa and from SE Asia to Latin America. Demand in the offshore businesses will probably dry up only before the oil does. It is possible that this sector will be more stable than the wet tanker sector that is plagued with its own problems.

I do hope that India does not make the same mistakes in the offshore space that it made with its main fleet, which has seen a steady decline over the decades and become, in the words of one commentator, a minnow in its own backyard.

Unfortunately and broadly speaking, though, what I see happening in India is that a weak regulatory authority, an unscrupulous Maritime Education and Training establishment and a corrupt seafarer recruitment apparatus will continue to stymie maritime job prospects. I believe that we are in a situation similar but much worse to the eighties' recession, when foreign owners felt- rightly or wrongly- that Indian ratings were just not worth the cost, effort or headache. I see the same thing happening- albeit to a lesser extent- with Indian officers in the present recession. I look at this possibility with deep sorrow, because the professional advantage Indian officers enjoyed for so long has been frittered away so quickly. Momentum was with Indian mariners a generation ago.  Alas, no longer.


Amitosh Kumar said...

Sir, loved your analysis over this very important issue, but being optimistic feel it will not happen in future, as we Indian Officers are very hard working and we will do our best to neutralized that effect as per your analysis. But true that Government is not doing anything for seafarers. sir hoping for bright future ahead.

Manish said...

Good analysis. I hold the same kind of view albeit through an unstudied data of the market. The job market for Indian Officers will slip away like it did for the crew if we do not take corrective actions.
Indian officers will not be worth the cost, efforts and headaches. Possible Solutions 1) Take some share in the ship owning and ship chartering business. 2) Improve the national economy to involve considerable ship transportation from indian ports. 3) Improve the training standards of Indian crew.

Anonymous said...

please stop this bullshit

Anonymous said...

Well all i can say is that it is not how much you earn but it is how much you save

Unknown said...

main reason behind this are the lack of vision from the dg shipping by allowing new officers training inst. and corruption from mmd surveyors by passing incompetent jr officers in their orrels.IN MUMBAI AND KOLKOTA IT IS BIG CHAIN INVOLVING SURVEYORS AND THEIR AGENTS.

Unknown said...

Thanks for your concern with Indian seafarer. I think the camaraderie between the shipping company and the seafarer itself should improved all over the time. To produce a well-equipped individuals to work onboard.