Looking for the prize behind the wrong door
While tankers are currently generating healthy returns for their principals, the other segments - Offshore, Containers and Dry - are enduring various shades of red for prolonged periods of time now.
Not coincidentally, overheads in the major shipping centers have more than doubled in the past decade. Unlike many industrial businesses, shipping has a massive fixed cost component in its administrative cost structure. Crew, luboil and insurance are virtually commoditized and most ship-owners are price-takers across these categories that together account for nearly 75% of cash operating costs.
The balance is comprised of spare parts, maintenance, and lastly, shore overheads. Clearly, some managers are better than others and are able to create wide advantages in costs. But, the challenge of coming up with a new medicine for a life long chronic condition, is an un-realistic goal, if all you use is the same quiver you have had for decades. The answer to such questions has always been technology, and the timing to address the current market challenge could not be better. The intersection of two major trends in shipping– mobile computing on the one hand, and a continued rise in costs and a drop in revenue on the other, represent potentially the most important opportunity for the industry in recent history.