Global Shipping and Roles of Blockchains in 2020

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The International Chamber of Shipping, based in London, estimates that the global shipping industry which is responsible for moving approximately 90% of goods around the world, generates $half a trillion of turnover p.a. There is a fleet of 50,000+ merchant ships registered in over 150 jurisdictions and crewed by 1 million sailors. It is, without doubt, an industry that we all rely on for the goods we purchase but pay little attention to on a day to day basis.

However, one set of statistics that many fund managers do monitor, as it gives an indication as to the state of the global economy, is the Baltic Dry Cargo Index. This index offers an insight into the demand for cargo space on ships worldwide, and therefore an indication of the degree of demand for goods that need to be transported globally.

Since September 2019, the Baltic Dry Exchange Index has seen a sharp fall. The real question now is, given that the International Monetary Forum (IMF) is predicting the world is likely to experience an economic decline greater than 2009, how low will the prices on the Baltic Index fall?

 Baltic Dry Exchange Index Apr 2019 to Apr 2020

 Source: Trading economics.com

It is incredible really that such an important part of our global economy has, until recently, remained almost stuck in a technical ‘back water’. While ships that move the cargos have become ever more sophisticated and technically advanced, the systems and procedures have largely remained analogue and paper- based. In order to move goods around the world, documents such as sales contracts, charter agreements, bills of loading, port documents, letters of credit, tax certificates and proof of insurance are required to track and trace items as the goods are transported.

These documents are often produced multiple times as different parties wish to keep copies for their own records, with the documents passing from factory to transport firms to railways, and ports to ships to customs – so the list goes on. The shipping industry has, until recently, focused its attention on building bigger and more sophisticated vessels. However, as a UN review of Maritime Transport stated, in 2018, “The value of shipping can no longer be determined by scale alone. The ability of the sector to leverage relevant technological advances is becoming increasingly important”.

Blockchain technology has been seen as a way to help improve the efficiency of logistics in the global shipping industry, by reducing the widely spread paper trail and multitude records that are needed to be kept by different parties. The ability to have one record of goods being shipped (that many different parties can have access to) both reduces errors and the time it takes to move items from one country to another.

The biggest and most successful Blockchain-powered platform is Tradelens which now has over 100 members and accounts for the tracking and handling of 60% of all containers globally. However, in order that more global shipping can use this technology, there are still challenges and obstacles that Blockchain technology faces:

Different software – companies use different types of data storage. In order for Blockchain technology to be effective, data needs to be structured and stored in a manner that can then be shared with other parties i.e. not on a laptop, nor in corporate silos where firewalls do not allow access;

Initial cost of implementation – there are upfront costs in order to implement it and smaller players, i.e. transport firms, ports, manufactures etc, may therefore be deterred;

Few industry-standard solutions – although FedEx, DHL Express, and UPS are working together ondeveloping Blockchain standards, the Blockchain in Transport Alliance (BiTA), that has 500+ freight, transportation and logistics firms, is encouraging the use of Blockchain-powered solutions.

 Governance –questions often posed according to Jeff Stollman, at Rocky Mountain Technical Marketing, are, “Who makes rules? Who owns the data? How do I keep my competitors from seeing ‘my’ data? What is the process to approve updates and changes that will certainly occur?”

Despite this, it would appear that the world economy may slow down in the short-term, but globalisation and international trade will not go away. However, the global shipping industry will need to operate more efficiently and look for ways to reduce its costs. Blockchain technology is set to play an import role as we see some of the above challenges addressed and other technologies such as drones, robotics, Internet of Things (IoT) and Artificial Intelligence (AI) being used in conjunction with Blockchain technology. Improvements in the efficiency of global shipping will assist many industries including (but not limited to) manufacturing, food and healthcare industries.

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