The image of the third-party ship management sector is changing writes Edward Ion from Navigate Response.

Strange as it may seem today, the idea that a shipowner would ask a third party to manage their vessels was an anathema just four decades ago. In many parts of the world, shipowners viewed the management of their vessels almost as a family duty – and in many cases it was just that.

The concept of using a third-party manager is relatively new and only gained traction in the 1970s.

Because it is still considered a novel idea by some, it is estimated that only around 20% of the global merchant fleet is currently ‘out-sourced’ to third party ship managers.

Until recently the main or even only attraction of handing vessels over to third party managers was because they could do it ‘more cheaply’. And the most successful managers in the early days could do exactly that. But thanks to ever more stringent regulation and the fact that shipping has become a much more transparent business with an incessant public and media gaze, the managers had to develop their strategies and change their ‘sales pitch’ to owners under increasing pressure to ‘do the right thing’.

More recent events such as Covid-19 and the invasion of Ukraine have also accelerated the change in the business models of many managers. The pandemic has thrown much light on how different managers deal with their principals’ ships and crews.

Working with ship managers large and small, the team at Navigate Response has dealt with a wide range of issues good and bad over the past two years.

The crewing crisis in which seafarers have been trapped on vessels for months and sometime years on end has placed enormous stress on managers and their owner principals. But we see discernible change among the management community as many have risen to the challenge of the crewing crisis. It has been an opportunity for many managers to show owners that they are far more than just cost-effective machines caring only for the bottom line.

For all the consolidation and M&A activity shipping has seen, the business remains dominated by small to medium sized family-owned companies. We see that it is these companies which are coming to rely on professional management companies increasingly as the stress of events like the pandemic take their toll.

These ‘super managers’ can cater for the needs of owners on a global basis. Not only is the technological delivery of systems and process superior but the range of expertise available in the bigger managers is now greater than ever before.

For managers, the ‘race to the bottom’ in fee terms may be about to end as more owners first realise then come to appreciate that having a top manager at your side during moments of stress is an invaluable asset.

While horror stories about managers and their crewing agents abandoning crews still proliferate during these times, a more accurate picture of the third-party market today is one of managers going the extra mile to help crews and their families.

Not only are crew safety and wellbeing now significant differentiators between managers, the range of wide expertise now available among managers is often a critical factor in an owner’s decision on whether to use a third-party manager or not.

As the small to medium sized owner grapples with the often perplexing demands thrown up by the decarbonisation movement, the leading managers are now acting in an advisory role assisting owners navigate across regulatory and legal hurdles.

This feature of ship management service provision will become more prominent as the perception shifts from ‘doing it more cheaply’ to ‘adding real value to your business’ takes hold in the ship management sector and shipowners will benefit from that.

Copyright 2022

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