A flurry of USCG type-approvals could push the industry toward the next stage of development – consolidation
Every company has its own business model and aggregated together these form the growth profile of the particular industry within which they operate. The growth profiles vary, but in shipping some product providers are at the mature stage. A case in point is the pump industry, a vital supplier to the ballast water industry. The design of the main types of pumps has been around for 100 years. The gains since then have been marginal and breakthroughs in technology require an enormous amount of research and development for relatively little gain. The result is a mature industry that is beginning to be consolidated by investors around a few keys players and brands.
In my opinion, the ballast water treatment industry is still a long way from being a mature industry, and there is still scope to think outside the box, but there is now a certain sameness about the technologies. At the moment the differentiation is from an external force, the regulators, which is a somewhat unnatural input, but one that is being applied to almost every facet of the shipping industry.
For there does become a point in the growth of an industry that hard decisions have to be made – should a company pursue growth by consolidation in a particular sector, or move into another sector that will offer greater potential for returns to its shareholders?
In my opinion, the regulatory environment is producing such a tipping point, and I am not referring to IMO ballast water management rules which take effect in September 2019. I am referring to the ‘magic ticket’ of US Coast Guard type-approval and Nor-Shipping, which takes a few months earlier in June. By my calculations, all the remaining applications for US Coast Guard (USCG) type-approval will have been processed and awarded by then. This is based on the time between application for type-approval and the date type-approval was granted for the 16 systems currently on the USCG list.
A further 11 are pending. This includes variations and/or upgrades to systems already type-approved plus ballast water systems new to the pending list. I calculate the average number of days to be certified as 172, and the median to be 169 days.
Based on the median value, and assuming no further ballast water systems are added to the seeking approval list, the Miura system of Japan will be approved on or by 4 June 2019, which happens to be the start of Nor-Shipping. Cue Japanese celebrations in Oslo.
But not everyone will be celebrating, as that approval of the last to be added to the list would take the number of USCG systems approved to 27, which is approximately a quarter of all the systems on my database and maybe 50% of the systems actually available or currently manufactured.
At approximately the same time, the USCG is expected to show how it will conform to VIDA and effectively harmonise with IMO testing. Should the USCG delay or prevaricate, the task of the remaining non-type-approved ballast water system providers becomes almost exponentially more difficult from a marketing point-of-view.
2019 will rush by in a flurry of approvals, lobbying and retrofits but companies need to look ahead and plan their consolidation moves to if they want to participate in the mature stage of the industry.
How secure are your ballast water management systems from cyber attack? Book now for the forthcoming Cyber Risk Management Forum in London on 25 June.