Delivered by Mark Dickinson on 26 April 2021 at the first session of the Subcommittee on Wages of Seafarers of the Joint Maritime Commission
May I begin by joining the Shipowners in thanking you and the Office for the preparations made for this session of the JMC Subcommitee on the Wages of Seafarers. I am sure that they were doubly difficult given the changes to the way that we all work that have taken place over the past year.
When we last met, my opposite number highlighted some of the many ‘unknowns’ faced by our industry. Back then, he called up a worrying cast of uncertainties: Brexit, US protectionism, and declining Chinese output, among them. All could potentially unbalance the global equilibrium, he predicted.
I mention this because it is extraordinary how trifling they all now seem. We have come through 14 months of turmoil during which nearly all reasonable expectations have been upended to the extent that a post-pandemic world has, at times, been hard to envisage. This has been the greatest global upheaval since the second world war, for shipping and pretty much every other aspect of life.
After a period of such profound disruption, it is worthwhile taking stock of what has survived, what elements of our society and of our industry have demonstrated the endurance and robustness to get through such a storm.
Well, clearly, the global shipping industry is still with us. None of the major players have tied up their ships for good and trade volumes remain at levels that even twenty years ago would have been hard to imagine. The vital factor that has got us through – the characteristic that makes our industry unique – is the deep mutual respect that unites seafarers, shipowners, and the relevant legislators.
You can see this in some of the milestones of the year just gone. When the terrible effects of the crew change crisis struck, the reaction was a joint one from employers and unions. We responded together to press for vaccines for those at sea. And it was together that we charted a route out of the Ever Given bottleneck.
I say this because I believe that the spirit of building on our collective interests should inform our discussions today. Let me first, however, turn to the economic circumstances before us.
To the causal observer the emergence from the pandemic appears remarkable. In April, World Trade Organisation director general Ngozi Okonjo-Iweala told us that: “Trade recovered more quickly than expected in the second half of 2020. This rebound has continued, and the WTO’s baseline trade forecast foresees an 8% increase in the volume of world merchandise trade for 2021.”
She is not alone. The Economist predicts that: “Operators of ships ferrying containers, packed with consumer goods or components, are set fair for a banner year.” Maersk predicts profits of $6bn-$7bn, up from a pre-pandemic estimate of $5.5bn. And the Baltic Dry Index is at its highest point for a decade.
We do have some insight into why this might be. The cumulative effect of lockdowns around the world mean that domestic savings are at an all-time high, so people are buying goods with what they might have spent on a holiday, or meals and entertainment.
Authoritative industry observers tell us, however, that this is unlikely to be a short-lived moment of market energy. Drewry’s latest Container Forecaster, for example argues that: “carriers are set up nicely for at least another two very profitable years”. The OECD concurs. Its report from March 2021 said: “global GDP growth is projected to be 51⁄2 per cent in 2021 and 4% in 2022, with global output rising above the pre-pandemic level by mid-2021.”
Happily, the issues that were worrying the employer’s side two years ago have also receded. Chinese GDP is staging a significant recovery, recording its highest growth rate ever in the results posted on 16 April. Eswar Prasad, a China finance expert at Cornell University, told the Financial Times that even after considering the “phantom effect” of the low-base comparison from last year, the first-quarter figure was “clear confirmation of the resilience and momentum of the Chinese economy”.
The IMF now forecasts that the US economy will stage the strongest come back of any of the advanced economies.
I am also conscious that optimism about shipping’s future is not confined to this side of the table. We know from BIMCO and Clarksons that in March more commercial shipping was ordered in a month than in the entire previous year, breaking a decades-old annual record for container ship orders. That is a huge vote of confidence, not to mention demonstration of liquidity, on the part of ship owners.
It is not just the container trade either. As we all know, leisure cruising took an incredible knock because of the pandemic. But according to the Financial Times in March, the bounce back has been astonishing. “A round-the-world trip on Oceania Cruises’ Insignia sold out in a day, with prices starting at £38,000. Silversea Cruises announced it had “shattered its bookings records”, and Royal Caribbean, reported a 30 per cent uptick in new bookings since the start of the year”.
The Seafarers’ Group has prepared two briefing notes which we would like to share with the sub-committee and for the contents to be appended to these opening comments in the report of this meeting. They provide a fuller economic context for these discussions and look also at the performance of the cruise sector.
Against this backdrop, we have a cohort of seafarers who made unique sacrifices during the pandemic. The crew change crisis saw nearly a quarter of the entire workforce stuck at sea for protracted periods, and a similar proportion marooned on dry land, often without financial support.
So, we have a buoyant industry with all the indications are that we are set for a run of good years and a workforce much of which is either exhausted or struggling to make ends meet.
That brings me back to my observations about what really distinguishes our industry – the unique bonds and shared objectives built during careers where both life and livelihoods depend upon trust shared.
That is why this is the time for a step change in the way we pay those who crew the ships and handle the cargo. Pandemic aside, the demands on them are growing – to work with leaner crews, to deliver the digital revolution, and to make global logistics fit for a carbon-neutral future. As our talks progress we will establish that a daily rate of $21 falls significantly short of the wage that we believe is appropriate for such demanding roles in a modern, forward-looking industry like ours.
I am hopeful that the settlement we will come to during this session will be one that we will all be able to reflect on with pride: pride that our response to the pandemic will reflect well on our industry’s values; pride that we recognised that this was a moment where change was achievable and desirable; and pride that we rewarded seafarers appropriately for the steadfast approach they brought and bring to their work.