Smaller shipowners in danger: Geneva Dry risk workshop

It was a standing room during a specialist workshop at the opening day of the second edition of Geneva Dry that saw panellists turn their attention to various aspects of risk management for dry bulk shipowners and operators.

Moderator of the session, Neville Smith, director of maritime PR consultancy Mariner Communications, got proceedings underway by pointing out the panellists would try to go through the session without mentioning the president of the US or AI unless they wanted to face a time penalty or a shot of Geneva Dry gin.

Andrew Roberts, head of EMEA at risk management platform RightShip, took first to the mic and outlined the big picture of where he thinks the industry is from a risk perspective. He said there are two things to look at that are being challenged at the moment: the ability to manage the long-standing risks that have been persistent in the industry for many years and continue to persist and the ability to adapt to the environment today and manage the new risks.

“Vessel owners and managers really where the rubber hits the road are still struggling with those things. But those risks are very much symptomatic,” Roberts noted, adding that causal factors also include things like geopolitics, increasing tonne-miles, increasing age of vessels and the ability to source and retain crew onboard, in addition to the newer risks such as digitalisation and data literacy that people are struggling with.

“These risk factors are actually putting pressure on what is already a very fragile and asymmetric system, and that is in itself an extreme risk that needs to be managed,” Roberts said.

Bas Van Steijnen, chief risk officer at Nova Marine Carriers, stressed that the constantly changing landscape is causing a lot of problems for shipowners, such as the change in rules and regulations in terms of fuels.

“We trade our ships worldwide, and the question is, will these fuels be available for everyone to take in the future? I think that, for us, is a massive risk.”

Vasileios Gkikas, global lead for dry bulk at class society ABS, thought the biggest challenge in terms of general risk when it comes to decarbonisation and alternative fuels is the fact that, for the first time, this risk is “totally outside our reach and our control”.

“The industry that is supposed to bring us this availability is not there,” he said.

Gkikas saw risks extending and changing daily, whether it is the fuel choice, the technology, the retrofitting, or the regulatory visibility.

“I don’t remember seeing this multitude of parameters and functions and uncertainties in 25 years. We see the owners coming to us every day with a new demand or inquiry, and we understand that this is done under pressure, which means that they are quickly changing their mind or they’re exploring new options,” Gkikas said.

Gus Majed, group CEO and founder of Paratus, the world’s first reinsurance company that writes cover against the energy price for both consumers and producers, told delegates that a lot of the issues with shipping companies are that even if they want to manage their bunker fuel freight price risk, only about 5% can hedge, while the other 95% don’t have that ability.

For him, “certainty is priceless”, and when one quantifies all the risks, “paying for a premium in the long term saves so much aggravation”.

William Hogg, senior analyst at counterparty risk provider Infospectrum, divulged that there are people who happily exist in a high-risk environment.

“Every day, my jaw just drops at the amount of risk that people are willing to take on…. People are prepared to take risks that you would never see in any other industry,” Hogg said, adding: “In 25 years of my career, I’ve always thought that at some point the quality will rise to the top and people will pay that premium, but it never does.”

“I think the whole supply chain is trying to do a lot more with a lot less,” Roberts added.

Asked how small dry bulk owners and operators would adapt to the new environment, panellists unanimously warned that most of them won’t survive.

“This is why you’re seeing a lot more consolidations, which are going to get even more profound,” Roberts noted.

Van Steijnen observed a lot of demand from external factors and also charterers demanding more and more but not willing to pay more.

“Unless we also get charters to recognise that shipowners are investing time, money and effort and they back us to sustain these additional costs, we’ll see consolidation going forward,” Van Steijnen said.

Gkikas suggested that there will be a level of clearing and that the market will reshuffle, stressing that “the amount of data, information, regulatory compliance and risk mitigation is so huge” and that he does not see any way that these companies will survive the next two or three years.

“There are a lot of people who have nothing to do with shipping, making up rules and thinking they know better than us how to organise it. And in the end, the consumer will pay. So, I think we’re in for a very difficult period,” added Van Steijnen.

Despite the initial warning, the session ended with Trump versus AI in terms of risk for shipping, with ABS’s Gkikas getting the best reaction from the audience by outlining the risk of AI acting as the US president. It was unclear whether he was forced to take a double shot of Geneva Dry gin for this closing statement.