Seafaring industry faces economic crisis, decline in competent crew

MANILA, Philippines – Notwithstanding bail-out packages from the world’s greatest economies like the US and the UK, the maritime industry has begun to feel the effects bof the global financial crunch.

The International Transport Workers Federation (ITF) reported that there had been a dramatic fall in dry bulk charter rates, due to falling demand for products from China, India and countries from Southeast Asia, a trend that threatens seafarers’ livelihood.

Suffering since ‘08

The shipping industry has been suffering from losses since 2008.

“Second quarter figures showed that westbound growth had dropped to 5.24 percent from 11.62 percent in the 1Q and over 20 percent a year earlier,” says Brenda Kirsch, in a report published to the ITF’s Seafarers’ Bulletin No. 23/2009.

Kirsch said containerized traffic to northern Europe, meanwhile, recorded only a 3.6 percent growth compared with the 9.3 percent in the 1Q.

She also said that in June 2008, total westbound destinations expanded by less than one percent, compared to the figures 9.35 percent in May 2008. Even the cruise ships and the oil and chemical tankers, are affected by the crisis.

Plunging dollar means lower remittances

As the US financial crisis deepens, the value of the US dollar also plummets and this spells a looming remittance crisis, since most seafarers are paid in the US currency.

The more than 300,000 Filipino seafarers can thus expect undervalued remittances.

From January to October 2008, the aggregate remittances of land- and sea-based overseas Filipino workers reached US$13.7 billion (PHP648, 695,000,000 based on FOREX October 2008). But this could have been undervalued, Kirsch said, due to the falling value of the US dollar and the increasing inflation rate in the Philippines.

Last August, independent think-tank IBON Foundation, Inc. reported a slowdown in remittances this year, despite the increasing deployment of overseas workers.

“[I]f remittances are slowing despite rising deployments, this may imply that average earnings of OFWs are dropping and also lower incomes for each remittance-dependent household,” said IBON’s assessment.

While salaries are losing real value, the mariners must also expect wage cuts. There were reports that employers want a 10 to 15 percent cut on wages as part of their austerity measure.


Furthermore, the ITF said the economic slowdown is also raising real fears that crews could be left high, dry and unpaid if shipping companies become bankrupt while they are in transit.

Fabrizio Barcellona, ITF Maritime Operations Manager and the one responsible for the day-to-day assistance to ITF inspectors and seafarers-in-need said they have already gathered clear evidences of the impact of the economic downturn on seafarers because some companies have already gone bust, leaving unpaid seafarers around the world.

The ITF, however, said they are already finalizing guidelines for its inspectors on how to handle incidents and support crew when ships are abandoned or companies had declared bankruptcy.

Decreasing able officers a problem, too

While there is a problem in salaries and jobs, the maritime business faces another crisis: shortfall of able officers to crew the growing number of ships.

Notwithstanding the global economic downturn, Lloyd List, one of the leading maritime business newspaper said crewing challenge for shipowners remain.

“Before the economic crisis hit, sipping companies and managers were facing a massive and increasing challenge as to how to meet a growing shortfall in officers as the global fleet expanded. Some ship managers were turning down new business because they could not be sure they could find the needed officers to crew these extra ships,” says Lloyd’s List.

Since October 2008, says Ole Stene, president of the ship managers’ organization, InterManager, warned of severe crew shortages and ships lying idle because of lack of competent crews.

The latest report of Drewry Shipping Consultants, Manning 2009, published last February said officer supply in 2009 rose 10.9 percent from the 2005 figures, now reaching 517,000—over one-third of these Asians: Chinese, Filipinos, Indians.

However, this number is still short of 33,000. And this figure, reports Manning 2009, is lower than the figures of 2008.

Lloyd’s List further said: “Its Global Manpower model, compiled with Precious Associates, projects supply will rise to 573,000 by 2013. On current trends, the shortfall will have increased by 56,000. However, allowing for 10 percent newbuild cancellations, and a 10 percent rise in scrapping trims, the forecast shortfall [on officers] drops to 42,700.”

Recruitment, wage pressure

There are also difficulties in recruiting new cadets as the shipping industry competes with other industries.

Recruitment agencies are now stepping-up their efforts to lure new cadets; but training them to become seniors will take several years, by which time the shortfalls will be most accurate, Lloyd’s List said.

Lloyd’s List also explained, there is limited scope to cut crewing levels further, especially with rising concern and regulatory attention on working hours and casualties caused by fatigue.

On the positive note, the acceleration of fleet modernization with increased deliveries of more efficient ships and more scrapping of older, labor-intensive vessels should result an overall reduction in crewing requirements.

On one hand, this scarcity of officers has particularly affected specialist tonnage, such as some types of tankers and gas carriers.

“This led to rapidly escalating salary levels and employment packages being offered to recruit, or poach, such sought-after seafarers,” says Drewry.

Some employers, the report stated, were increasing wage levels for certain ranks several times during the year just to retain or recruit officers.

This practice breeds, on the other hand, discrepancy on salaries, depending on nationality and/or supply/demand situation; reduction on differentials on some nationalities occurs.

And, as some shipowners are moving towards global pay levels, depending more on the overall supply/demand situation and qualifications and experience, rather than nationality, the trend clearly benefits some more than others, the Lloyd’s List reported.

On the other hand, there have also been other incentives such as improved leave entitlements, which also add to crew cost and reduce availability, just to retain experienced officers.

In addition, loyalty bonuses, enhanced pension and other welfare payments and allowances for education and training are being developed to attract and retain senior officers.

Nonetheless, with the upcoming International Bargaining Forum (IBF) Model Agreement negotiations between the ITF and the owners and managers, to apply from the beginning of 2010 later this year, the employers are cautious about what level of increase, if there is any, due to uncertainty in the shipping markets and economic prospects.

There’s a need for a unified action—ISAC

In Manila, seafarers’ group International Seafarer’ Action Center (ISAC), meanwhile said, there is a need for a unified action to counter the effects of the crises.

“A strong and genuine, democratic union is a need for the protection of our seafarers’ rights and welfare,” says ISAC in a statement.

There is also a need for a stronger and more comprehensive legal instrument, like the Maritime Labor Convention of 2006, in order to ensure the long-fought benefits will not be gone to waste, ISAC statement said.

ISAC, a non-profit organization, is now campaigning heavily for the ratification, adoption and proper implementation of the MLC and has been conducting series of seminars in the regions, to enlighten the seafarers about the necessity of the ratification of the said International Labor Organization’s (ILO) instrument.

“As the ILO has said, the crises won’t be over until two years. So, the MLC ratification is a must,” ISAC statement concluded. (Dateline Philippines)