December 19, 2019 Stine Kolding

Is Circular Economy an opportunity for shipping?

The Circular Shipping Industry

… that was what we started exploring in the partnership The Circular Shipping Initiative – with partners Danish Ship Finance, the Shared Value Company, Danish Shipping, Maersk and DFDS.

With the initiative “The Circular Shipping Initiative”, we started exploring how exactly the framework of Circular Economy could introduce new value to the shipping industry. In order to truly enable circularity in the global value chains we have built, the shipping industry needs to be included around the table, because they are a vital part of the logistical setup for so many companies.

The shipping industry has been burdened by surplus capacity, low freight rates and depreciating secondhand prices for large parts of the past decade. New technologies are being applied to existing business models to lower costs and enhance efficiency. But it becomes increasingly hard for individual players to develop a competitive edge if operational excellence is delivered through third-party algorithms or software available to all industry players. In many cases, these new technologies are simply redefining shipowners’ license to operate.

The problem
The traditional guiding principles of value creation in the shipping industry corrodes with the introduction of new technologies and more interconnected global supply chains. The industry is struggling to navigate the short-term agenda of trade tensions, geopolitics and the enforcement of new environmental regulation. Few players consider the potentials of adjacent markets, different parts of the value chain, and new industries.

Why it matters
The digital transformation of the shipping industry and the industry’s deeper integration into global supply chains will test core business models. Some players will focus on the ecosystem play related to the movements of cargo, others will work to standardize and scale business models of vessel ownership while the more traditional players will continue their operation. Shipowners that do not adapt to the emerging changes and begin to digitalize and innovate their business models may find it increasingly difficult to deliver a return on invested capital. In time, they may even find it difficult to employ their vessels.

What to do about it
It is time to re-introduce profitability in the shipping industry. We need to think critically about potential new sources of value, shifting competitive dynamics, and regulatory policies that affect both the revenue and expense sides of the business.

Thank you for the adventure to
Anne Katrine Bjerregaard spearheading the initiative, Christopher Rex from Danish Ship Finance, Søren Stig from the Shared Value Company, Asbjørn Overgaard Christiansen from Danish Shipping Academy, Mads Bentzen Billesø from DFDS, Maersk, The Circular Shipping Initiative, and the Danish Maritime Fund.



Are you a pioneering shipping company, this initiative and recommendations might actually be worth exploring. 

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