Global Marine Trends 2030


Contents Page 03

Foreword 03

Executive summary 04

Using scenarios 08

Global drivers 12

Population 12

Economy 20

Resources 34

Environment 42

Commercial sector 48

Naval sector 94

Offshore energy sector 112

Disruptive forces 126

Postscript 140

The GMT2030

Team 141

Glossary 142


Foreword Welcome to Global Marine Trends 2030


We thought the world would not change much between the last decade of the twentieth century and the first decade of the twenty-first. As events unfolded in the financial world, the Middle East and emerging countries, we were shocked by what happened. It has had dramatic impact on geopolitics, international security, world trade and business. As we enter the second decade of the twenty-first century, our business environment is becoming more complex, global and multi-polar. This development is driven by many factors, some of them easily discernible and others more subtle. One of the principal driving forces is the aspirations of people in developing nations. These are behind massive dislocations and upheavals in the BRIC countries, in the Middle East and elsewhere around the globe. We are seeing a new, multi-polar, world economic configuration emerging (in terms of resource demand and allocation, trade and consumption patterns and a shift in the centre of economic activities from west to east). It poses many challenges but also opens many new opportunities for the marine industries. These will have profound impacts on commercial shipping requirements and natural resource exploitation; an emerging shift of geopolitical configurations where future competitions and conflicts between nations is more likely to involve future competition at sea. This will pose threats to peace and stability. Coupled with these threats, new business opportunities are opening up for naval suppliers as a result of the increased demand for naval systems of all sorts. Increasing demand for sustainable energy sources also seems to be driving the search offshore. The central question is: What will 2030 look like for the marine industry as these forces gather their momentum, accelerating changes around us? Global Marine Trends 2030 has been prepared by a team from Lloyd’s Register, QinetiQ and University of Strathclyde, using publicly available and proprietary information, and a scenario development methodology. The team has shed some light on a few variables that they judge will have a disproportionate influence on future events and possibilities. It will help you to recognise signposts indicating where events are headed, and to identify opportunities for policy intervention and formulation. We share this publicly to encourage broader understanding of global issues that affect the marine industry and their impact in the form of scenarios, but not projections. I hope you find the Global Marine Trends 2030 useful, informative and interesting; and that it helps to stimulate debate and thinking of the realities and challenges - and solutions - that will shape the future of the marine industry. Richard Sadler Chief Executive Officer Lloyd’s Register Group Limited F


Executive summary Page 04 Global Marine Trends 2030 | Executive summary We started the twenty-first century with great optimism. “The world is flat” and “the end of history” proclaimed by great thinkers such as Friedman and Fukuyama. They believe historical and geographical divisions are becoming increasingly irrelevant and free market capitalism of the West and its lifestyle may signal the end point of humanity’s sociocultural evolution. And calamity unfolds before our very eyes: the financial crisis, the failure of the Copenhagen Climate Change Conference, the pace of WTO negotiations and the threat of pandemic. With astonishing events unfolding in the financial world in 2008 and in the Arab world in the early part of 2011, giant forces are at play that seem beyond the control of even leaders of powerful countries, let alone business executives who traditionally see their abilities to shape the big picture future limited. They are right in that there is little they can do in affecting these giant forces such as technology, demographics or the movement of capital and manufacturing around the world seeking best investment returns. But they do have a choice: they can either react passively to such forces or anticipate them to their advantage. Either way they ignore these forces at their peril. It seems obvious now: the voluntary opening up of China in 1978 and India in 1990 and their eventual accessions to the WTO in 2001 and 1995 respectively have had an enormous implications to the world, which should not surprise anyone, as they together consist of nearly 40% of humanity. Their impacts have been magnified by other countries like Brazil which also rushes into development. The plug-in of more than 2.4 billion people to the world economic power grids, and their dreams of achieving a lifestyle and earnings similar to the developed world, are bound to have gigantic impacts on world trade and the environment. These in turn change social attitudes, drive supply and demand in resources, technologies, goods and services. The effects have been particularly felt in the marine world: demands for additional new tonnage for container ships for transporting manufactured goods, bulkers and tankers for commodity trades; the demands for drilling for oil and gases into ever greater depth offshore, for example. Were these events predictable? If they were predictable could the major disruptions and discord they caused be foreseen? Could their effects be smoothed or these events be avoided altogether? Executive summary | Global Marine Trends 2030 Page 05 The opening up of China in 1978 and India in 1990 and their eventual accessions to the WTO have had an enormous impact to the world, as they together consist of nearly 40% of humanity. Page 06 Global Marine Trends 2030 | Executive summary Executive summary | Global Marine Trends 2030 Page 07 For much of the past two years, Lloyd’s Register, QinetiQ and University of Strathclyde have worked together as a team to prepare this Global Marine Trends 2030 report. It aims to define key global trends using demography, economy, resources and environment. We explore the underlying factors which drive them; where they seem headed; and how they might interact to affect the marine world in 2030. Our thinking is exploratory rather than definitive; our discussion is descriptive rather than predictive. It is not a prediction of the world in 2030, but rather a description of what these giant forces are and how they might interact. It is a work in progress and the trends are at best indicative in nature based on existing works in the public domain and our own research. Nevertheless by examining a small number of the giant forces that we consider most influential, the trends presented should provide a good basis for framing strategy formulation discussions, and identifying policy options for threats and opportunities that arise from them. The marine world in 2030 will be almost unrecognisable owing to the rise of emerging countries, new consumer classes and resource demand. We are telling a story with no clear or definitive outcome. But, by examining different scenarios based on major global drivers (such as economic and population growth, resource demand, accelerated technological advances, rise of consumers and cities in large emerging countries), we can map out divergent futures. By bringing together trends and their interactions, industry-specific insights, and using simple problem-solving techniques, we have been able to create three possible outcomes in a quantitative, actionable and unbiased way, namely the “Status Quo”, “Competing Nations” and “Global Commons” scenarios. These principally separate out the possible actions of society in terms of international politics. The propensity to compete or cooperate depends on human nature. In the “Status Quo” scenario, we expect long term economic growth and an increase in global challenges. Reactive and short-term solutions are found to address many issues that affect trade and commerce, which in turn affects shipping. Absence of market solutions to the crisis of security and trust, rapid regulatory change, overlapping jurisdictions and conflicting laws lead to checks and controls, encouraging short-term portfolio optimisation and vertical integration, creating risk to the shipping world. There will be no single dominant trade power, but a collection of powers trying to support current world orders and systems to advance their interests. All recognise that a reversal to insularity and protectionism is detrimental to all parties. Superior risk management is essential and maximum flexibility is called for from the shipping community. Naval power continues to grow around the world. Energy demands increase offshore investment. In the “Global Commons” scenario, we see even more economic growth. Cross-border integration (e.g. noncustom trading) and virtual value chains are encouraged by built-in security and compliance certification, regulatory harmonisation, mutual recognition, independent media, voluntary best practice codes and close links between investors and civil society. Networking skills and superior reputation management are essential. We envisage major agreements on international trade, climate change and environmental protection. We can see accelerated expansion of globalisation with strong international institutions regulating international affairs and arbitrating disputes in a transparent and fair manner. This is a win-win world for all participants and shipping will expand in line with rising living standards and an expanding world economy. Although there will be less need for naval power, investment will continue as economies grow. Offshore energy demand will increase more rapidly. In the “Competing Nations” scenario, dogmatic approaches, regulatory fragmentation, national preference and conflicts over values and religion gives insiders an advantage and put a brake on globalisation. Gate communities (e.g. trade blocks), patronage and national standards exacerbate fragmentation and call for careful country-risk management. In this scenario, we can see the shipping community will suffer with the potential roll-back of globalisation and a rise in protectionism, encouraging local production and consumption. At best regional blocks are formed with barriers erected and a preference for intra-regional trade, resulting in a reduction in demand for international shipping and the disappearance of a level playing field. This is a world of self-interest and zero-sum games. Local presence for shipping is necessary and competing demands from national interests make life complicated. The naval sector will see greater demand, but suffer from lower economic growth. In between these three scenarios, there will be disruptive events that introduce step changes to the world. We have constructed a few potential disruptive events to see how they might change the future. It is not possible to know which scenario will prevail; however the trends presented can help readers to challenge conventional wisdom, pressure-test existing business models, identify market opportunities, and develop more innovative products and services. At the very least we hope it will generate debate and discussions about what the future might hold for us all. The GMT 2030 Project Team.