Looming Seafarer Shortage Will Challenge Carrier Profitability

By Patrick Burnson, Executive Editor
August 11, 2014 - SCMR Editorial

The current shortage of officer corps seafarers is forecast to worsen and risks impacting ocean cargo carrier profitability, according to Drewry’s recently published Manning 2014 Annual Report.

Owners and managers need seafarers – and they want experience, expertise and quality. However, they do not have the resources to fund substantial rises in remuneration. In recent years owners and managers have been heavily cost focused as weak freight rate earnings have yielded poor returns.

Manning has become the natural target for cost cutting, being the single largest element in ship operating costs, with officer recruitment being directed towards the lowest cost source.

Drewry estimates the current officer supply to be 610,000, representing a shortfall of 19,000 personnel. This shortfall is forecast to rise to 21,700 by 2018 given that there will be a requirement for an additional 38,500 officers by this time.

“While ratings (crew) remuneration packages tend to follow International Transport Workers Federation (ITF) standard terms, officer earnings are more market driven,” says Drewry’s managing director Nigel Gardiner. “Manning costs look set to come under renewed upward pressure, putting a further squeeze on profitability unless owners are able to push freight rates higher.”

However, there is less supply pressure with ratings and this will have a moderating influence on wage negotiations currently underway between the ITF and International Bargaining Forum, which represents employers. The other factor in owners’ favor is that most seafarers are paid in U.S. dollars. When converted to domestic currency, seafarer earnings tend to compare well with other occupations.

“But the shortage of officers remains, especially among senior engineering ranks and for specialist ships such as LNG carriers,” warns Gardiner. “There is also a general drift towards shorter working tours and increased benefits which is putting further pressure on supply.”



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The U.S. Department of State maintained Thailand’s Tier 3 ranking, the lowest category, in its annual Trafficking in Persons (TIP) Report, which was released this week.

During this webcast we'll explore how supply chain execution convergence (SCEC) helps break down the barriers resulting from disparate, fragmented technology solutions allowing you to more effectively serve customers, adapt to changing business cycles, and save both money and resources.

Between a consumer-led revolution, competition from Amazon, international sourcing, and port shutdowns, retail supply chains are challenged like never before. A new e-book and self-assessment tool offer benchmarks and insights into how supply chains can keep up with the retail consumer.

The report, entitled “U.S. Freight Transportation Forecast to 2026, which is drafted by ATA and IHS Global Insight, calls for a 28.6 percent hike in annual freight tonnage, as well as a 74.5 percent gain in freight revenues to $152 trillion in 2026.

During this webcast experts will uncover how an industry first automated technology tool can fill the gaps in the shipment assignment processes, and optimize your transportation network for the lowest possible cost.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.