By Vaibhav Agarwal. First published in Business UpTurn, Feburary 7, 2025

The shipping industry stands at a crossroads, with numerous questions swirling around its future. As stakeholders grapple with the complexities of de-carbonization, technological advancements, and economic pressures, the query “What should I do? How should I invest?” is more pressing than ever. Even industry veterans, bankers, and analysts face uncertainties. With the industry potentially on the verge of a revolution akin to the transition from steam to diesel, it’s vital to break down the path ahead into manageable phases: short-term (the next three years), medium-term (4-10 years), and long-term (beyond ten years). But can this be classified as a revolution of equal magnitude?

Shipping has never been an industry of abrupt transformations. Historical precedents show a gradual evolution, with the development of steam engines as a prime example. It took nearly half a century to progress from the first steam engine to a version capable of global trade. An additional fifty years were required to refine this technology to an efficient standard. The advent of diesel engines and containerization followed a similar slow trajectory. Containerization, which began in 1956, only became a substantial force in global trade by the 1990s. This historical context suggests that the current challenges, primarily societal demands for zero emissions and affordable freight are unlikely to be resolved overnight.

Decarbonization stands at the forefront of the industry’s challenges. The dual demand for zero emissions and cost-effective freight services presents a complex puzzle. Unlike past technological shifts, the current challenge is not just about improving efficiency or capacity; it’s about fundamentally changing how ships are powered and operated. The industry’s past, marked by slow and steady progress, suggests that achieving these goals will require a pragmatic approach, focusing on incremental advancements rather than expecting a singular, transformative solution.

To navigate this complex landscape, the industry must consider a phased approach:

Short-Term (Next Three Years): Laying the Foundations

In the immediate future, the industry’s focus should be on laying a solid foundation for future advancements. This period is not about achieving radical technological shifts but preparing for them. The first step involves taking stock of the existing fleet, which will still be operational and contributing to emissions by 2050. This necessitates a thorough evaluation of the current business model and fleet composition, identifying which assets can continue to operate efficiently and which need to be phased out or retrofitted.

The second step is planning for retrofitting, not just technically but also organizationally. Shipping companies must adapt to manage the complexities of new technologies and operational demands. The traditional model, focused on cost minimization with minimal staff, is inadequate for the challenges ahead. The industry must invest in a skilled workforce, both at sea and onshore, capable of managing sophisticated digital and mechanical systems. This organisational overhaul is crucial as the industry transitions from a cost-focused model to one that prioritises sustainability and technological innovation.

Medium-Term (4-10 Years): Building and Retrofitting

In the medium term, the industry will move from planning to execution. This period will likely see the implementation of initial retrofitting projects and the construction of new ships designed with emerging technologies. Given the current state of technology, it’s unrealistic to expect fully realised “green ships” within this timeframe. Instead, the focus should be on integrating available technologies, such as dual-fuel engines capable of running on both traditional and alternative fuels.

Retrofitting existing ships will be a complex, multi-faceted endeavour. Studies indicate that retrofitting involves numerous small changes, each contributing to overall efficiency improvements. This phase will also involve scaling up organisational capabilities, particularly in digital systems. The shipping industry has long struggled with dysfunctional digital systems, a situation that must change to accommodate new technologies and more complex operations.

The labour issue is another critical consideration. The shipping industry, like agriculture, faces a labour shortage. The move towards more sophisticated technologies will require a workforce with specialised skills, blending technical knowledge with an understanding of digital systems and economics. Training programs and investment in human resources will be essential to ensure that the industry has the talent it needs to manage this transition effectively.

Long-Term (Beyond Ten Years): Transformative Technologies & Business Models

The long-term horizon holds the promise of truly transformative changes. As the industry moves beyond initial retrofitting and integration of existing technologies, new energy sources and business models will come to the fore. One potential game-changer is nuclear power, specifically molten salt reactors. These reactors offer several advantages: they operate at atmospheric pressure, minimising the risk of catastrophic failures, and produce a manageable amount of waste. Moreover, nuclear power’s high energy density makes it an attractive option for powering large vessels over long distances.

Carbon capture technology also presents a viable pathway for long-term decarbonization. While not a panacea, carbon capture can play a crucial role in reducing emissions from existing ships. The concept involves slowing down ships, capturing carbon emissions, converting them into dry ice, and then using this carbon for fuel synthesis or other applications. This creates a “virtuous circle” where emissions are continually recycled and reduced.

The potential for new fuels, particularly green fuels, remains a significant area of exploration. However, these fuels are currently a poor substitute for traditional heavy fuel oil, both in terms of energy density and cost. The transition to green fuels will likely be a gradual process, influenced by technological advancements and market conditions. In the meantime, dual-fuel engines offer a practical solution, allowing ships to operate on both conventional and alternative fuels.

How Cargos will Shift Power Dynamics

The changing role of cargo owners is another critical factor in the industry’s evolution. Historically, major oil companies played a significant role in the tanker business, ensuring efficient logistics and cargo delivery. Today, however, the logistics efficiency has declined, and the average tanker delivers significantly fewer tonne-miles per deadweight of cargo than in the past. This decline reflects the need for cargo owners to take a more active role in shaping the future of shipping.

As the industry moves towards more complex and digitally integrated systems, data sharing and synchronisation will become increasingly important. Cargo owners, with their vested interest in efficient logistics, are well-positioned to lead this charge. However, they must overcome the natural inclination to hoard data and instead work collaboratively to optimise the supply chain.

The industry must also grapple with the inevitability of digitalization and automation. As Adv. Capt. Rahul Verma, founder of Ally Maritime and Legal Services, astutely observes, “none of us can ignore digitization & automation in our day-to-day lives; we can only delay its advent as digitization and automation for ports also are key to improve efficiency along with their dedicated implementation.” This statement reflects a broader trend across industries: the rise of digital technologies and automation is unavoidable. For shipping, this means investing in digital infrastructure, enhancing cybersecurity, and developing new business models that leverage digital capabilities.

Automation, in particular, offers significant potential for improving efficiency and safety. Autonomous ships, while still in the experimental phase, could become a reality in the not-too-distant future. However, the transition to automated systems will require careful planning, robust regulatory frameworks, and a skilled workforce capable of managing these new technologies.

Talking About The “Green” Agenda

The industry’s commitment to the green agenda is undeniable, but the path to achieving these goals is complex and multifaceted. In the short term, reducing carbon emissions might involve simple measures like slowing down ships and optimising routes. However, long-term solutions will require more radical changes, including the adoption of new fuels, propulsion systems, and operational models.

The potential for short-sea shipping powered by batteries is one promising area. Battery technology has advanced significantly, making it a viable option for short-haul routes. The energy efficiency of electric engines compared to traditional diesel engines is another advantage. For regions with extensive coastlines and archipelagos, such as Indonesia, Malaysia, the North Sea, and the Mediterranean, short-sea shipping could provide a sustainable alternative to road and rail transport.

In the medium term, green fuels will play a crucial role, even if they are not perfect substitutes for heavy fuel oil. The development of dual-fuel engines, capable of operating on both traditional and alternative fuels, provides a practical solution for the transition period. However, the industry must also prepare for the challenges associated with green fuels, including higher costs and limited availability.

Nuclear power, while not without its challenges, offers a long-term solution for large vessels. The development of molten salt reactors, which operate at lower pressures and temperatures, reduces the risk of catastrophic failures. Additionally, these reactors produce minimal waste, making them a more sustainable option compared to traditional nuclear power. The potential for carbon capture technology further enhances the industry’s ability to reduce emissions, creating a more sustainable and efficient shipping industry.

As we proceed ahead, one thing is clear: the future is uncertain, but preparation is key. By adopting a phased approach, investing in new technologies, and rethinking organisational structures, the industry can position itself for success in a rapidly changing world. The transition will not be easy, but it offers unprecedented opportunities for innovation and growth.

The next generation of shipping professionals, equipped with a blend of technical knowledge, digital expertise, and economic acumen, will play a crucial role in this transformation. For young people entering the industry, this is an exciting time, full of challenges and opportunities. The industry’s evolution may not be a sudden revolution, but it will be a profound transformation that shapes the future of global trade for decades to come.

Vaibhav Agrawal is a distinguished Senior Defence Journalist and Editor, renowned for his proficiency in multimedia journalism. With a comprehensive understanding of Defence, Aerospace, Geopolitics, and Space, he excels in articulating intricate subjects to cultivate public awareness.