The Six Dimensions of Shipping's Destiny

If you have heard me speak to an audience in the last five years, you may have heard me talk about the 6 D's of shipping’s future in the current century. These are six macro themes which will influence what shipping does, how it does it, and where it does it, over the coming decades.

The 6 Dees come in three pairs.

The first pair of Dees is Decarbonisation and its twin process Digitalisation. Every shipping conversation I have these days seems to cover these two themes. The crazy thing about decarbonisation is that governments and bodies like the IMO introduce legislation or conventions to prevent consumers from using GHG-emitting fuels, or pay a levy to keep using them. (I am reminded of the anecdote ascribed to the movie director Michael Winner: "London is a fabulous city - they let you drive in the bus lanes for just £80 a day.") A more rational legislation would be to put a termination date on production of hydrocarbon fuels: "After 2060 the production of non-renewable gasoline and gasoil will be banned." Fuel producers would then invest in the required alternatives or go out of business. As things stand, investment in biofuels, methanol, ammonia, fuel cells, batteries and LH2, is a small percentage of what is required to reach 2050 decarbonisation goals. Go ahead and build the ammonia powered ships but good luck getting the ammonia fuel for them. Even the big liner companies are struggling to find realistic projects to fund. Eastern Pacific has dropped ammonia dual fuel engines for its large bulk carrier newbuildings in favour of LNG, though CEO Cyril Ducau says they are committed to ammonia, as soon as it becomes available.

Digitalisation has been more successful to date. A bubble of software solutions has expanded covering everything from enhanced situational awareness to voyage optimisation to digital twins and predictive maintenance. Most importantly, without digitalisation, decarbonisation would be impossible. The EU emission trading scheme and the IMO bunker levey rely on digital record keeping. A paper-based reporting system could never achieve the same results.

The arrival of Artificial Intelligence promises further innovations in technical and commercial vessel management to optimise efficiency and minimise emissions. However there are challenges. For instance, in 2024 and 2025, my company Shipping Strategy along with partners AAC Clyde Space and Amorphous, an AI company, with UK Space Agency backing, built an enhanced situational awareness model for ships which can make use of satellite imaging as well as inputs like AIS and geospatial mapping to create a risk score for ships. Our idea was to create a system to price marine insurance more efficiently. Yet our market research showed that insurers and ship owners are inundated with digital systems offers which do not or cannot communicate with each other. They would prefer one integrated system from one supplier than paying multiple suppliers. I suppose in time that consolidation will create such an ecosystem. Beware however the long-term issues of platform decay that tend to follow on from consolidation in digital services.

The second pair of Dees is Deglobalisation and Dedollarisation. These are related, and the second is a consequence of the first. Since the 2008 global financial crisis, the process of pushback against globalised supply chains has come from the importing nations of the OECD, where the greatest number of blue collar jobs and investment has been lost and populist politics has taken hold. After 15 years of growing numbers of anti-trade policies in the OECD, it was the Biden administration in the US, not Mr Trump, which imposed 100% tariffs on Chinese electric vehicles alongside significant import controls on Chinese semiconductors, steel, aluminium, batteries, photovoltaic cells, medical equipment, and container cranes. MAGA is a symptom, not a cause of deglobalisation. The process is ongoing in real time but the emergence of new blocs is apparent. These include the BRICS and the Shanghai Co-Operative Organisation - read more in my recent blog post about how President Xi used the recent SCO meeting to propose a reorganisation of international diplomacy.

By the way, the EU’s carbon border mechanism and trade probes seem destined to lead inevitably to a trade war with China. As I have written in the past, China’s response to the EU carbon border is to move some of its manufacturing to Morocco, which has ports inside the carbon border and is a day’s sailing from Spain and two from Italy – a short enough distance for battery powered vessels to operate, thus avoiding the costly business of buying EU Allowances to cover shipping CO2 emissions. As such, deglobalisation can be viewed at least in part as a consequence of decarbonisation.

As the US has combined tariffs with sanctions, its strategic competitors have begun to trade with each other in their own currencies. China has paying RMB for years already for coal, oil, gas and metals from Iran and Russia. Offshore RMB markets operate around the world in various financial centres now. China has begun to reduce its holdings of US treasuries, though it remains the second largest creditor. The RMB is still not fully transferable and China is unlikely to allow it to appreciate when it still relies so much on exports for economic growth. Nevertheless, this month, China has introduced a digital cross-border RMB payments system for its SCO and BRICS counterparties, bypassing the greenback altogether. Now that China Inc. controls around one quarter of the global commercial shipping fleet, either directly or via partially listed subsidiaries, how long will it be before Beijing insists on paying for some freight in RMB, or via its new payments system?

The long-term Xi Jinping plan is to create a consumer led economy which relies less on exports for growth, which would give the central bank greater room to allow the RMB to appreciate. The problem with the plan is the fifth D – Demographics. There are 65 million fewer Chinese below the age of 20 than there are between 20 and 39. The next generation of consumers and workers will be smaller than the current one, with an even smaller cohort to come after it.

This is now a global phenomenon. An April 2024 report in the UK based medical journal The Lancet says that “Global annual live births peaked in 2016 at 142 million (95% UI 137–147), declining to 129 million (121–138) in 2021…Fertility is declining globally, with rates in more than half of all countries and territories in 2021 below replacement level…These future trends in fertility rates and live births will completely reconfigure the global economy and the international balance of power.”[1] The report forecasts a fall in the Total Fertility Rate (TFR) in Western Europe from 1.53 live births per mother in 2021 to 1.44 in 2050, with similar falls already happening in Japan and South Korea. The report also forecasts that only 49 countries will have a TFR above the replacement rate of 2.1 by 205) and by the year 2100 there will be only six, namely Chad, Niger, Samoa, Somalia, Tonga and Tajikistan – all which are in some of the most fragile regions relative to climate change.

To date the main reasons for falling birth rates has been female education, economic participation, and availability of birth control. But most reports including this one do not forecast the potential effects of climate change on reproduction. It is known that exposure to extreme heat during pregnancy increases the risk of premature and still births, while the effects of more extreme weather on agricultural output could lead to widespread hunger, further reducing population growth and increasing mortality rates among the young, elderly, and vulnerable.

This matters because shipping demand is derived from growth in global GDP. The two main ways to grow GDP are to increase population or increase productivity. The third way – to increase territory- has been out of favour for 80 years but is trying to make a comeback in eastern Europe and Asia.

The fall in global population growth, and its eventual reversal later this century, will have to be offset by increased productivity and unsustainably increased per-capita consumption if shipping demand is to continue to grow at historic rates. This seems uncertain at best. Most consumers consume most when they are in early adulthood into middle age, forming families, buying homes and things to put in them. As we age, we consume less. An ageing population is unlikely to be one which drives GDP growth through increased consumption. The world’s current economic model will rely on the remaining fast-growing populations for its future labour pool and consumption growth via enrichment and the rise of a middle class with disposable income. The trouble is, in Europe and the US, the political model is changing to one in which free movement of labour across national boundaries is less favoured than previously. The most likely consequence is lower economic growth until some step change in productivity can be achieved – hence all the political excitement about artificial intelligence.

The energy transition is just as likely to decrease productivity as it is to increase it, because none of the available transport fuels carries as much energy by volume as fossil fuels do. We already know that ships burning ammonia or methanol, or using batteries or fuel cells, will have to refuel more often, or travel more slowly, or sacrifice cargo space to fuel storage, all of which reduce productivity. Shipping’s path to net zero is likely to be a long path to shorter voyages and more regional trade in a deglobalized economy with lower consumption growth rates than have been the case for the last 40 years.

As the report in the Lancet says, population change will “completely reconfigure the global economy” and already is, with China seeking access to future pools of labour in Africa and South East Asia to replace its own workers who are already becoming too few and too expensive. But China is not importing these workers, rather it is offshoring its own manufacturing and growing overseas markets via the Belt and Road Initiative. Global trade lanes will change in the next 30 years as a consequence of decarbonisation and demographics.

The authors of The Great Demographic Reversal suggested several years ago that a smaller labour pool would result in higher wages and higher inflation. They were perhaps too early to consider how capital would prefer then to invest in labour-saving AI tools and further automation of labour-intensive service industries. Already, states like Bangladesh which rely on call centres and the like are restructuring their economic and education policies to try to head off the anticipated wave of mass unemployment that AI is driving in the services sector, much as automation did to manufacturing a generation ago.

Meanwhile, climate stress, migration, access to resources and the growing triangular political competition between non-religious autocracies, religious autocracies, and democracies are likely to lead to further trade disruption such as we are already witnessing in the Middle East. One shipowner I have spoken to says that their tonne miles and emissions have increased by 12% due to re-routing ships away from the Suez Canal route.

The last of our six D's, Defence, is my shorthand term for this sort of disruption. Its visible effects are more acute – wars, attacks on shipping, the dark fleet of tankers - than some of the other D's but its long-term consequences are already significant. For instance, on my UK passport, I am less welcome in or am discouraged from travelling to around 30 more countries than was the case 20 years ago when I was flying to all parts of the world in the employ of a global bank. Millions of Chinese who work for state-owned enterprises, the civil service, universities, are now discouraged or entirely prevented from traveling abroad as Beijing seeks to control the flow of people, information, and intellectual property.

A number of global flashpoints could disrupt shipping for longer than one might expect. Already the Houthis have continued to attack despite ceasefire discussions agreed in Gaza. It would be wise to consider the effective closure of Suez an indefinite disruption for most vessels, apart from those flying particular flags. And after a ceasefire is agreed, the region will remain a tinder box. In the South China Sea, the Philippines and China are coming closer to direct conflict. Taiwan remains a lynchpin of strategic competition in the western Pacific.

What flag ships fly could increasingly affect how they are treated in ports and seas around the world. The whole system of flagging could come under pressure as ‘rogue’ flags and pop-up flags with low safety and security standards further undermine the status quo. Arsenio Dominguez, the Secretary General of the IMO, told an August 2025 meeting of the Panama Chamber of Commerce that  the IMO has no power to regulate international registries. In a deglobalising world in which certain state derogate UNCLOS and other shipping conventions, will the IMO go the way of the WTO? Be in no doubt: individual commercial vessels will find physical security and seafarer safety a greater challenge in future years than they do even today.

To summarise - the 6D's that will define shipping's future are:

1. Decarbonisation – Efforts to reduce carbon emissions.

2. Digitalisation – Increasing reliance on digital technologies.

3. Deglobalisation – The retreat from global trade and integration.

4. Dedollarisation – Moving away from the US dollar as the global trade currency.

5. Demographics – Shifts in population, peaking around 2050-2080.

6. Defence – Rising geopolitical tensions and military considerations.

If you are creating a strategy for your shipping or trading enterprise, you need to consider the 6D's. If you want our input, contact me on info@shippingstrategy.com.

[1] www.thelancet.com Vol 403 May 18, 2024 2057 Global fertility in 204 countries and territories, 1950–2021, with forecasts to 2100: a comprehensive demographic analysis for the Global Burden of Disease Study 2021, GBD 2021 Fertility and Forecasting Collaborators