Shipping rewinds the future

Shipping has never been short on forecasts. Fleet growth, trade demand, freight rates, fuel choices, and asset values are all projected years ahead, even though the industry has a habit of making long-range predictions look fragile.

A different planning technique is now gaining attention. Rather than starting with today’s market and projecting forward, backcasting begins with a future scenario and works backwards to establish what needs to happen to get there.

Japanese liner Ocean Network Express (ONE) has brought the concept into sharper focus through its View of the World project, which examines several possible versions of the global economy and container shipping in 2050 and considers what those futures mean for decisions made today. The carrier examines how long-lived investments such as ships and terminals fit across different scenarios rather than relying on a single projection of how the market develops.

A spokesperson for ONE stresses that the exercise is not designed to produce another forecast.

“Backcasting is one of several strategic frameworks ONE uses, and we apply it as a planning discipline rather than a prediction tool. We set out multiple plausible scenarios for how the global economy and container shipping could look in 2050, drawing on a wide range of external and internal perspectives. By backcasting from that future, we can determine the strategic actions we must take today.”

The idea is not new. Governments and international organisations already use variations of backcasting. The Organisation for Economic Cooperation and Development incorporates it into strategic foresight work, the UN Development Programme includes it in its strategic planning toolkit, while the UK government and Singapore’s Centre for Strategic Futures use versions of the technique in public-sector planning.

For shipping, the attraction is the mismatch between the industry’s volatile short-term markets and the long life of its assets. Mark Williams, head of consultancy Shipping Strategy, says backcasting is already established, although it is more common outside commercial shipping. He argues that ships’ long lifespans make the method particularly relevant.

Backcasting asks what would have to be true for a given future to arrive

“So backcasting has already caught on, but for long-range planning rather than within the current business cycle,” he tells Splash. “As ships are 25-30 year lifespan assets, backcasting can be a useful tool for strategic planning for ship owners investigating what the net zero world of 2050, or later, will look like.”

A conventional forecast might extrapolate container demand and calculate the fleet required to meet it. Backcasting can, for example, start with a competitive net-zero liner network in 2050 without a radically different pattern of world trade and work backwards through the ships, fuels, terminals, and technology required in 2045, 2040, and 2035.

Williams sees an advantage in escaping assumptions embedded in today’s market but also identifies one of the method’s central weaknesses.

“The danger of backcasting is that it can induce wishful thinking,” Williams says. “Circumstances outside your control can emerge over the backcasting period, so the backcast needs constant revision. Say, teleportation, for argument’s sake, is discovered, and shipping of inorganic objects becomes unnecessary. Or a future in which the human population peaks much earlier than currently expected. That could affect demand for container shipping, dry bulk shipping, and liquid fuel shipping.”

Tristan Smith, professor of energy and transport at the UCL Energy Institute, sees merit in the concept but says its usefulness depends on the futures being tested.

Katsuhiro Nishinari, professor at the University of Tokyo, is more bullish.

“Backcasting is a powerful methodology, especially in rapidly changing and highly uncertain environments like global shipping. Traditional forecasting tends to extrapolate current trends, which often fail when disruptive changes occur,” Nishinari says. He has been helping ONE with its backcasting project.

Nishinari does not see the technique replacing forecasting entirely but expects it to become more relevant as shipping deals with decarbonisation and other structural changes.

“While it requires a mindset shift and cannot completely replace traditional forecasting, backcasting is extremely useful for long-term strategic planning, particularly in areas like sustainability and decarbonisation. As companies face unprecedented future challenges, I believe more industries will adopt this approach,” he says.

Mikael Lind, senior strategic research advisor at RISE, sees another application: using backcasting to coordinate a fragmented maritime ecosystem.

“I do think backcasting has considerable potential in shipping, although I would not primarily see it as a better way of predicting the future,” Lind says, adding: “Backcasting means starting with a desired future and working backwards to identify what must happen to achieve it. That is fundamentally different from forecasting, where we start from where we are today and ask where current trends may take us.”

This matters because shipowners cannot deliver many of shipping’s biggest transitions alone. New fuels require producers and bunkering infrastructure. Ports require investment. Cargo owners, banks, regulators, shipyards, and technology providers all influence whether a future shipping system is achievable.

“This is where I think backcasting becomes particularly powerful. If the actors concerned jointly define a desired future state around a common object of interest, they can then work backwards together to identify what needs to be in place to reach it,” Lind says.

For Lind, forecasting and backcasting therefore serve different purposes: “Forecasting helps us understand where current developments may take us. Backcasting allows us to define where we want to go and then identify what is required to get there.”

Shipping finance may already contain more backcasting than the industry realises, as Christopher Rex, head of innovation and research at Danish Ship Finance, points out.

“Backcasting will catch on, but it should not be sold as a better way of predicting shipping markets. It answers a different question. A forecast asks what is likely to happen,” Rex explains. “Backcasting asks what would have to be true for a given future to arrive, and what that implies for decisions taken today. For an industry that commits capital to ships trading well into the 2050s, that discipline is valuable.”

Rex says the Poseidon Principles trajectories effectively work backwards from the IMO’s 2050 ambition into annual carbon-intensity pathways. But a critical limitation remains for an industry where timing determines investment returns.

“The limitation is timing,” Rex argues. “Backcasting tells you where the industry is heading and which ships risk becoming unfinanceable before the end of their economic life. It says nothing about when to buy, at what price or with how much leverage, and in shipping, that is where most capital is made or lost.”

As is noticeable, backcasting has many positives, and some believe it is a potent tool in the shipping toolbox for building a clearer picture of the future. Others are more sceptical.

Kate Adamson, one of shipping’s best-known futurists, argues that the technique belongs to an earlier era of strategic planning.

“I’m afraid the 1990s just called and would like its scenario planning tool back. Backcasting has been around for decades, used by companies whose preferred future involved up-and-to-the-right growth in a VUCA – volatile, uncertain, complex, and ambiguous – world.”

Adamson argues today’s environment is instead brittle, anxious, non-linear, and incomprehensible, making the starting assumptions behind any long-term exercise particularly vulnerable.

“Everyone has a plan until they get punched in the face,” she quips. “The ones who will get back up are currently prioritising resilience, agility, adaptability, and continuity, not another buzzword.”

Nick Gross, Lloyd Register’s global containership segment director, takes a more measured position.

“Shipping has always relied on a range of tools to help navigate uncertainty, and backcasting is one of several approaches that organisations may choose to incorporate into their strategic planning,” he tells Splash.

Gross says its value depends heavily on the assumptions underpinning the scenario, while geopolitics, technology and economic shocks can quickly change shipping’s trajectory.

“For this reason,” he says, “we would not view backcasting as a substitute for forecasting or other forms of scenario analysis. Rather, it is one tool among many that can help support decision-making.”

That thinking is already visible among major shipmanagers.

Bjorn Hojgaard, chief executive of Anglo-Eastern, told the recent Splash Singapore event that the biggest strategic change is accepting that forecasting itself is becoming less dependable.

“It’s less about predicting the future and more about asking what we need to have in place in order to have optionality and cater to different futures,” he said.

Anglo-Eastern has run a long-range scenario exercise, working backwards from two very different versions of 2035 rather than trying to identify one future and plan exclusively around it.

That may be where backcasting ultimately finds its place in shipping. Few proponents argue that it can tell an owner what freight rates will be in five years, what a vessel will be worth at the bottom of the next cycle, or which fuel wins the race to replace conventional bunkers. Instead, it offers a way to test today’s long-lived investments against several possible tomorrows.

Source: Splash247

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