In your perspective, what is the role of 4th Industrial Revolution at Sea?
The shipping industry is under more pressure than ever before from regulators, environmentalists, and customers to improve performance. But these demands have come at a bad time because the performance improvement strategy used by shipping companies over the last fifty years is "running out of steam". Freight rates fell rapidly in real terms between 1945 and 1986 but since then they have started to increase (Figure 1).
Figure 1 Real freight rates fell until the1980s, but are now increasing
For the last 50 years companies have built ever-bigger ships, right across the size range and between 1996 and 2019 the average ship size increased by 75%.. For example, in the early 1980s a handy bulker was 30,000 dwt, but today’s “handy” ship is more like 60,000 dwt. At the same time, they squeezed costs with cheap finance, flagging out and very tight office overheads – a typical company in bulk shipping has less than two people in the office for every ship at sea. But as the ships get bigger the economies of scale are diminishing, as are the ways to cut costs.
A new strategy is needed and I4 digital technology is by far the best option available today. It will make it possible to improve efficiency in dealing with costs, emissions and through transport efficiency. I4 has been used effectively in transport sectors on land, ranging from cabs to parcel delivery and even formula 1 racing – you cannot win a race without it! So, we know it works. The challenge is to make it work in shipping
The I4 revolution is possible by the availability of small, cheap microcontrollers. These are tiny but powerful computers which can be embedded in all sorts of equipment on the ship. They can do three things. Firstly provides information about what the equipment doing; secondly allows precise control of equipment by messaging across a network; and thirdly can run algorithms to avoid errors and improve performance. To give just one example, before the I4 revolution, balancing the cylinders on a diesel engine was a major mechanical operation. The camshafts operating the exhaust valves and fuel injection had to be adjusted – not an easy job. The electronic engines operate the exhaust valves and fuel injection hydraulically, with electronic controls. This makes it technically possible to balance the engine while it is running. This is not new territory – formula 1 racing cars balance their engines on every revolution at 16,000 rpm.
A rapidly expanding range of new electronically controlled equipment is now becoming available, designed to improve the performance of merchant ships. The biggest problem is putting it all to work. Financial benefits are hard to quantify and there is concern that “the charterers will not pay for it”. In addition, shipping companies have slim management teams, with few executives who understand the digital technology well enough to commission it on a ship and make it productive. Even more importantly, once the “electronic” ship is in service, it will need new management systems to use it effectively. My experience working with companies on this over the last few years, it is challenging. Strong leadership is needed.
What is the role of the 5G network?
Communications play an essential part in making the I4 revolution possible at sea. Ships still operate as independent business units, and until very recently communication between ship and shore were quite limited. But things are moving very fast, opening a new world of global communication for shipping. But 5G is not a major part of this revolution. The new 5G networks will deliver data 10 to 100 times faster than current 4G networks, with latency (i.e. lags), as low as 1 millisecond. This will be useful for shipping company offices on shore, but not for ships. Except when in port, ships rely on satellite networks, linking the ship to access stations on land. These access stations link to the internet; the cable network; cellular networks and the cloud, allowing companies to set up large globally accessible data systems without investing in their own computer systems.
The expanding satellite network
The key development for shipping is the rapidly expanding satellite network. This will make it possible for shipping companies to integrate digital systems and databases between offices and across their fleet of ships. This is a terrific opportunity to develop the organizations needed to make I4 technology effective.
Figure 2 Rapidly growing satellite network will create the framework for smarter sea transport. Current satellites GX1-5 and planned GX6-10B
In the last five years Inmarsat has commissioned five geostationary satellites (see Figure 2 -GX1-GX5) – the latest, GX5 was commissioned this month. These K band satellites already have global coverage of the world merchant shipping routes, with steerable beams to focus bandwidth where it is needed. The Inmarsat Global Express system is already on 10,000 ships.
A much bigger step up in satellite capacity lies ahead. Inmarsat has 7 more satellites scheduled over the next two years (see Figure 2 GX6 to GX10B). Each of which will be more powerful than the last (GX9 will be more powerful than GX 1-6 combined!). The management of satellite traffic is also greatly improved so that busy areas such as the seas around the straits of Malacca will have plenty of band width. The strategic significance for shipping companies is that for the first time in history a fleet of ships can operate as a networked business with integrated systems, allowing teamwork of a sort we have been learning about during the Covid Pandemic. As I4 technology is built into the ships, information and tasks can be shared between land and sea. For example, the new Sperry Marine VisionMaster navigation system allows offices on shore to share the information available to the helmsman on the ship. This opens new ways of workload integration and planning- for example masters can delegate laborious paperwork!
What is the importance of autonomous ships for shipping industry?
Autonomous ships will play a specialised part in all this but are not a pressing issue for most commercial shipping businesses. With today's technology it is perfectly possible to build an autonomous ship. Indeed, Yara is building a 100 TEU containership to operate between its chemical plant and a nearby container terminal. The 100 TEU electric powered ship will save 40,000 short lorry journeys a year and have an excellent impact on the environment. But it will be expensive and does not need to be autonomous to get the environmental benefits.
My sense is that a more important benefit of I4 and communications will be to change the personnel system, making life on board ship much more interesting and opening new career opportunities as the crew become part of the shipping company’s global management team. Digital technology will make ships more efficient, more reliable, and cheaper to run. But I suspect the step to autonomy will only be worthwhile in local short sea services and other specialist applications which can justify the high cost and manage the risk. In today's world sending a 20,000 TEU containership to sea with no one on board would be risky. For the immediate future a better strategy would be to use the new technology to make the crew more productive.
How will ship design and construction develop in future?
In terms of the ships themselves, the surge of electronic equipment coming onto the market will make it possible to streamline on-board ship systems. It is exactly the strategy followed by the car industry twenty years ago when they replaced wiring with messaging, by developing CANbus control area networks.
The principle is simple. Instead of switching a pump on or off by sending an electric signal from a switch down a wire to the pump, you control the pump electronically. This is done by fitting an electronic actuator, plugged into a network. A digital message is sent to the pump through the network, telling it what to do (see Figure 3). In addition to starting and stopping the pump, this opens new possibilities. The actuator can send back messages reporting pump status; it can optimise speed in response to flow rates; log usage; and report vibration or power spikes that might indicate a problem.
Ships are crammed with systems that could be transformed by electronic operation and electronic products are increasingly available. The biggest challenge for shipbuilders is to integrate these systems, so that you do not end up with a hodgepodge of different networks, making life difficult for future operators, maintenance engineers and systems engineers rolling out the inevitable upgrades. Ideally the industry would develop standard shipboard network protocols for big ships. In due course this would open the way for process control systems, of the sort which are currently used on chemical refineries.
All this is a massive challenge. Building a fleet of smart ships and running them as a transport factory (see Figure 4) will require a great deal financial investment; training; and a change in the way activities are organised in this ancient business. Under the current system, there is a strict hierarchy, with the ship under the total control of the master, and an often uneasy relationship between ship and shore. Decisive control is essential for safety, but effective teamwork is important too. My vision is that in future shipping companies might shar information and management systems across the fleet. It is another step along the road which started with the autopilot in the 1960s and the unmanned engine room at night in the 1980s. Businesses built around teams will be more adaptable and quicker to respond to changing circumstances. And, of course we will all need to become much more familiar with making digital technology work!
How do you evaluate the outlook for demand in freight rates in the container, bulk, and tanker sectors?
One thing that will not change because of the I4 revolution is the market cycle. It has been around for at least 300 years (see Figure 1)! I expect the shipping industry will continue to have unexpected cycles in both directions, earning modest returns and very occasionally making lots of money. The value added by the I4 technology revolution is, unfortunately, likely be passed onto the charterers, which raises the issue I want to finish on.
In the spot market, shipowners and charterers are on different sides of the negotiating table. But if the industry is to move forward with digital technology, it would be beneficial if cargo owners became involved in developing the new ships and transport systems. Digital ships will be expensive, and this sort of investment is difficult to justify in financial terms when ordering a ship.
Getting cargo involved ensures the new digital technology is put to good use, especially in voyage optimization and through transport logistics. This applies to all the stakeholders including customers, ports, shipbuilders, equipment suppliers, bunker suppliers, crewing agencies – the list is endless. More stakeholders mean better information and organisation to manage the ship voyage more effectively. But we need to take one step at a time. This first step is for each company to understand I4 technology and decide what to do about it.
 According to the Clarkson Research fleet database, in 1976 the average cargo ship was 18,000 dwt. By 2019 it had increased to 31,580 dwt, a 75% increase as all size groups got bigger.
 There is already a protocol for small ships NMEA 2000
 McKinsey Global Institute The Internet of things: mapping the value beyond the hype, June 2015 comments that “customers will capture most of the benefits Of I4 technology. In the same report they estimate the potential value to logistics and navigation as $560-820 billion per annum in 20205.