Shipmanagement healthy and coming of age

Weak markets have helped drive business at a time when the sector is set to enter a third wave, executives believe

The latest shipping crisis has offered a double-edged sword for third-party shipmanagers, with a potential rise in business balanced against operating in an industry where your key customers are looking to drive down costs.

Lower freight rates prod owners, particularly smaller ones, into managers' hands, as they seek to benefit from economies of scale from large platforms and specialist knowledge of complex regulation.

Themis Papadopoulos, chief executive of Interorient Shipmanagement, says: “In lean times, having a small fleet can be an expensive proposition and these periods tend to lead to more ships being allocated to third-party managers.”

However, when revenue is squeezed, so is an owner’s willingness to spend. Sunil Kapoor, director and general manager of the Cyprus office of Fleet Management, says he estimates industry-wide management fees have dropped by about 10% over the past two years.

Estimates on the number of ships today in the hands of third-party managers range from 10% to 20%. And despite the difficulties experienced in shipping since the financial crisis, InterManager secretary general Captain Kuba Szymanski believes the sector is healthy.

“Don’t believe me; go for a reality check: how many shipowners went bust in the last eight years versus how many shipmanagers disappeared?” he asks.

“You see what I mean? Yes shipmanagers do precisely what is says on the tin: we manage. That means that sometimes we get better, sometimes worst results but we ... manage."

He adds: “It is interesting to note that the crisis actually helped big shipmanagement companies to get bigger and stronger.

“Small shipmanagers, those serving one owner only might be in trouble if their principal gets into the trouble but that would mean they were not very good managers. Who keeps all their eggs in one basket?”

28fc8c981983bf659e67208c6f3ebe27 Carl Schou, president of Wilhelmsen Ship Management  Photo: Wilhelmsen

As the fleet under third-party management has increased, so have the demands placed on service providers. Carl Schou, president of Wilhelmsen Ship Management, says the business has evolved beyond being the provider of human capital and “nuts and bolts” ship operation.

“Today, delivering what is agreed in the contract is not good enough,” he says. “We are the extended hand of the shipowner, that contributes to their bottom line, working as agents on their behalf to recruit and manage the best crew, procuring the best deals and being a compliance specialist.

“In the ever-increasing regulatory landscape, it is imperative that we make investments in our operating environment to cope with increasing requirements and demands.

“Just being compliant is not good enough any longer. It is normally expected that a manager must deliver an excellent shipmanagement service. To improve owner’s fleet performance and spending, we invest in digital solutions, training facilities and human resources.”

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Anglo-Eastern Univan chief executive Bjorn Hojgaard agrees the industry has evolved. He suggests the sector has arrived at a third wave after the mom and pop shops of the 1970s and the one size fits all operations designed to cope with more complex regulation.

“I think what you will increasingly see is lots more differentiation and much closer partnerships going forward. I think the industry is coming of age and I can see a good future for us. I think more and more owners will realise it’s a healthy option.”

This article is part of the October 2017 TradeWinds Shipmanagement Business Focus. Read the full report here.