May 2019, market leading Damen (Shipyards) Magazine requested an interview with ACL Shipbrokers Ltd to get a feel for the current state of the port tug market.
Please find the article below and a link to Damen’s website here:
Published in category: Harbour & Terminal
Towage expert Alec Laing delivered a presentation at ITS last June in Marseille on the state of the industry at the time. In this edition of the Harbour and Terminal journal, we catch up with him to see if there’s been any changes in the meantime.
“Overall, the economic and political backdrop has not changed a lot since last summer. There was an extensive market review in February for European ports. What it showed was that prices remained under great pressure, but had been relatively stable in small ports over the last 1-3 years.
“It’s the large volume ports where there’s been most competition and therefore most pressure on prices. This has been driven in part by the formation of so-called ‘ocean alliances’, where container liners are forming cooperations to make themselves more competitive. At the ITS there was a lot of talk of consolidation in the industry as a result of this – which has been borne out by Kotug Smit’s recent letter of intent to sell all shares. I think there is more consolidation to come. It’s hard for companies – particularly the smaller ones who are not back up by activities in other sectors – to cope with the pressure on their own.
WHAT IMPACT WILL ALL THIS COMPETITION HAVE ON SAFETY AND SUSTAINABILITY IN VESSELS?
“There is a limit to how low rates can go before safety becomes compromised. That would be disastrous. Safety will always be the primary concern in this industry. For operators their reputation is on the line so they place it before everything else. Any compromise on safety is only a short-term fix – it actually compromises business.
“However, while safety will not be compromised, the current market conditions could slow down advances in improvement.”
“What is threatened by current conditions is sustainability. Tugs have a long lifespan and, without increased earnings, it is likely to take a long time to see sustainable vessels become commonplace.
“With no regulation to force owners to scrap older assets and no financial incentive to do so, there is a buildup of older vessels – which may be more polluting. If we want to see more sustainability in the industry we need either rate increases or smart, cost-effective solutions, such as making Tier III NOx reduction a more modular, allowing vessel to be more easily compliant with IMO Tier III, which I believe is a core part of the Damen offering.”
WHAT CAN BE DONE TO REGAIN HEALTHY PROFITABILITY IN THE CURRENT MARKET?
“Opinion is that consolidation will be positive for the industry. It’s likely that consolidation will enable prices to bounce back – less players competing means less pressure to reduce costs. It’s also important that they incentivise their crew – to invest in them. Not just in the crew, but the whole organisation. That’s where operators will find improvement and get that little bit extra. If goals are aligned, they can expect loyalty. In the end, it’s not only about short-term profit, but with assets lasting 25 years or more, we are in it for the long-term.
“What could help is some way of helping owners to predict how their vessels can be operated for maximum efficiency. Currently such information is not readily available. There is some retrofitting of measuring devices taking place right now, but this is a traditional industry and it can seem expensive. It’s important that operators can see that the benefits of the reduced fuel consumption that can be brought about by sailing optimally.
“What will also help is for there to be raised awareness of the critical importance of towage in the logistics chain. Ultimately this is down to bodies such as the European Tugowners’ Association and the British Tugowner’s Association to address. It’s not something that smaller players can address on their own. And those organisations are working hard to get that message across.”