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Interview: Market outlook 2018

What’s in store for the maritime sector in 2018?

The last few years have been difficult for the maritime industry. Overcapacity has led to market consolidation and a downturn in orders for new ships. But is the industry now heading for calmer waters? We spoke to David Johansson, director of the marine business unit at SKF, to get his views on the market situation.
Engineering at Sea: Mr. Johansson, last year we spoke about how the maritime industry was experiencing tough times and how it might recover. How much progress was made during 2017?

David Johansson: Overall, 2017 was a year of recovery—but it is a gradual process. The industry is discussing how to manage the bottom of the marine market cycle, and is planning for the coming upturn. At the same time, we see a more diverse market today. The cruise and passenger sectors, for instance, continued to perform very well last year, with strong order intake. 2018 will be the year where we will start to see a sharp increase in newbuilding activities for these kinds of vessels. So, yes, there have been some positives despite a depressed volume market.

What are the main factors influencing the market right now?

Well, for the freight markets, such as bulkers, tankers, and container ships, 2017 was still a very difficult year. And to an extent, it will likely remain so during 2018. The recovery is slower this time, largely due to the significant overcapacity that arose from the shipbuilding boom some years back.

On the other hand, the economy has recovered in general, and many industries are doing very well across the world. As a result, the demand for raw material and industrial products has risen dramatically, which is good news for the transportation and maritime industries. Slowly but steadily, shipowners are placing orders for new ships, but there is still progress to be made in the next few years.

The demand for raw material and industrial products has risen dramatically, which is good news for the transportation and maritime industries.
David Johansson, Director of Marine Business Unit, SKF
We also spoke about market consolidation last year. Did this continue in 2017?

Definitely. It’s an ongoing development across the entire value chain, but mainly affecting shipyards and shipowners. The reason for this is that companies are turning to mergers and acquisitions to achieve economies of scale. Ultimately, this will help shipowners to tackle the issue of overcapacity in a better way, or to be more favorably positioned for the coming upturn. It’s all about adjusting to meet the actual demand and confirming the long-term strategy and competitiveness.

What about suppliers and OEMs? Are they facing a similar situation?

Actually, it’s a little different. During a downturn, the service market and aftermarket grow in importance to survive the short-term negative cycle, and OEMs and suppliers have to perform a kind of balancing act. While we are confident that the upturn is coming, the challenge is to prepare for it so that you are the preferred brand when that time comes. And to do this, you need to innovate.

As a result, we see many of the OEMs and suppliers reshaping their organizations and updating strategies, including forming strategic partnerships with organizations outside of the maritime industry: IT giants and tech startups, for example. These companies may offer the innovative spirit required to fast-track the development of new technologies. In this respect, 2018 will be a very interesting year indeed—and we expect to see a leap in terms of product innovation, not the least to be presented at major marine exhibitions such as SMM in Hamburg.

You should not underestimate the importance of heritage and experience in the maritime industry.
David Johansson, Director of Marine Business Unit, SKF
So what technological developments are we likely to see?

Continuing on the developments mentioned a year ago, we expect condition-based maintenance (CBM) to finally become more widely adopted. Companies are tailoring the technology to the specific maritime subsectors to make it more cost-efficient and integrated into daily operations. The challenge is to apply the CBM to the unique demands—and this is why you should not underestimate the importance of heritage and experience in the maritime industry. At SKF Marine, in addition to the customer-specific solutions, we are working closely with classification societies in order to establish the systems and standards needed to truly meet the regulatory requirements and improve operational efficiency.

In our experience, the industry is now definitely ready for this transformation. But it is crucial to develop or revisit your company’s operational and maintenance strategy and processes, and define the roles and responsibilities—especially when it comes to decision making. It is highly likely that more decisions will be made onshore in the future, thanks to ships and machinery getting increasingly connected.

Maritime tech trends

A look at the future of smart shipping

Join us next time when we will be talking to David Johansson about the latest trends and innovations in the maritime industry, including smart shipping and autonomous ships.

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