In recent years, Estonia’s maritime sector has rebounded from the effects of the pandemic, showing growth in both domestic and international markets. According to SRC Group CEO Hannes Lilp, the green transition offers Estonian companies a unique opportunity to differentiate themselves with environmentally friendly and innovative solutions.

“Methanol-based fuels and the hybridisation of ships can open new markets for the sector and strengthen Estonia’s competitiveness. However, progress requires strategic national support, international collaboration, and active investment in education and research,” Lilp notes.

A milestone year for the SRC Group

Last year was transformative for SRC Group for several reasons. “It was the first full year without the effects of the COVID-19 pandemic, and we achieved the highest turnover in the company’s history,” Lilp highlights.

He believes the maritime sector as a whole hasn’t been in such good shape for a long time. “Our clients, from large shipping companies to smaller niche sectors, demonstrated strong signs of recovery, directly reflected in our results. Comparing last year to this year, we see growth potential for the sector and our company, although certain challenges persist,” Lilp adds.

While growth has been impressive, profitability remains a challenge. “The natural recovery from the pandemic has driven margins down, as supply in the market exceeds demand,” he explains.

Confidence in investments also remains fragile. “The unstable global environment makes clients more cautious in their investment decisions. Although markets have recovered strongly this year, the courage to make capital investments proportional to market strength is still lacking,” he remarks.

“The IMO’s goal of achieving climate neutrality is a global environmental policy necessity and a strategic business opportunity for Estonia’s maritime sector. It enables the country and its companies to develop high-value-added and smart solutions, moving up the value chain.”
Hannes Ilm, SRC Group CEO

Lilp notes that the maritime sector doesn’t always behave as expected. “While geopolitical events, such as the actions of Houthi rebels, might seem negative, their impact on our sector has been more positive. Longer shipping routes due to these events have led to record-high ship utilisation, boosting the profits of shipping companies,” he explains.

Although such situations may eventually reduce overall trade volumes, Lilp adds that this hasn’t been significantly negative for shipowners so far.

Opportunities in the green transition

Climate goals present new challenges for Estonia’s maritime sector and open significant opportunities. For example, the green transition offers a chance to innovate by delivering new technologies and solutions that are not yet widely available to the global maritime market.

“Over the past five years, more than 90% of SRC Group’s business volume has directly stemmed from the climate goals set by the International Maritime Organisation (IMO) and the European Union. These include ship hybridisation, installing exhaust gas, ballast water, and wastewater treatment systems, as well as the integration of alternative fuels,” Lilp explains.

“The IMO’s goal of achieving climate neutrality is a global environmental policy necessity and a strategic business opportunity for Estonia’s maritime sector. It enables the country and its companies to develop high-value-added and smart solutions, moving up the value chain,” Lilp emphasises.

Estonian companies like Shore Link and Baltic Workboats are renowned for their innovative solutions. Startups like Lainepoiss and Flydog Marine also bring fresh ideas and technologies to the sector. “Our Methanol Superstorage (MSS) solution is the first and unique global solution for storing methanol in ship fuel tanks. It increases the storage capacity of methanol as a fuel by an average of 85%,” Lilp points out.

According to Lilp, methanol is currently the alternative fuel with the most significant potential in shipping and is the easiest to adopt. “The necessary technology already exists, and SRC’s innovation in this area is unique, offering a significant competitive advantage on the international stage,” he states.

Building trust among international investors

Estonia’s maritime sector faces challenges primarily due to its small size and the country’s young status. “Key issues today include limited access to financing and a lack of financial sector expertise in maritime affairs, which hinders investment in the sector,” Lilp explains.

For maritime companies to secure sufficient credit from financial institutions for large projects, Lilp believes it’s necessary to establish guarantee structures. “This market gap is addressed in other functioning markets but is still missing in ours,” he adds.

“Maritime affairs and the marine industry should be among the country’s priorities, and strong steps have already been taken in this direction. The recently established Maritime Cluster is an excellent example of the developing cooperation between the Estonian government and maritime companies. It fosters cross-sector capabilities to jointly develop new technologies, solutions, and services for international markets,” Lilp asserts.

Estonia’s competitiveness can also be enhanced through an efficient tax system and clear communication. “For instance, revenue from the maritime emissions trading system could be channelled back into the sector to support climate goals. Additionally, Estonia could be marketed as a hub for green technology and ship retrofitting, creating a positive image abroad. It is also essential to continue developing education and research in the sector to stay in step with global maritime innovations,” Lilp lists.

“These measures could help Estonia become a leader in maritime innovation, expand its international influence, and boost the confidence and interest of international investors in the Estonian maritime sector,” concludes SRC Group CEO Hannes Lilp.

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