Shipping faces serious challenges as it takes the long-term view
Julian Wilkinson, head of the Moore Stephens Shipping Industry Group, says, “More than ever, shipping will be an industry for long-term players. Operating costs increased in 2011, while the global economic climate deteriorated at a rate outpaced only by the growth of sovereign debt in some eurozone countries.
“The markets are languishing, and are likely to fall further. We have seen how, for the first time in a long while, some of the big tanker-owning companies have come under financial pressure. More owners and operators are likely to seek to renegotiate agreements with their financiers or with the yards building their ships, or both. And we can expect finance costs to increase, along with operating costs. Overtonnaging, meanwhile, remains the spectre at the feast, were there a feast to enjoy.
“We may see government intervention in 2012 to rescue ailing yards, at least on the part of those governments still in a position, financially, to intervene.
‘Impairment’ is likely to become a more familiar term in shipping circles, along with ‘Chapter 11’. The hand of government will also be evident in the tax affairs of the shipping industry. The UK has promised to consult on tonnage tax, which could restore permanently some of the benefits lost in the 2009 reinterpretation of the rules. And the EC should commence its review of tonnage tax regimes in EU countries.
“Meanwhile, demand for seaborne trade continues. Even if there is not enough work for all the new ships, we are seeing the emergence of a younger, more environmentally friendly fleet. There is also evidence of some rationalisation of competition which should feed through to better rates.
“Shipping’s glass is still, remarkably, more half-full than half-empty. Many owners, managers and charterers are reasonably confident of making a major new investment or development in 2012. And the underlying global nature of shipping continues to work in its favour. Given the choice between a domestic retail business in Kolonaki and a shipping business on Akti Miaouli, most would opt for the latter.
“Shipping may not turn the corner in 2012. Nobody yet knows where the corner is. Wider political and economic developments, as always, will play a part. It is said that there is nothing so admirable in politics as a short memory. In shipping, those who can remember the past and have a plan for the future will be the ones who fare best.”
Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 638 offices of independent member firms in 97 countries, employing 20,588 people and generating revenues in 2010 of $2,151 billion. www.moorestephens.co.uk
For more information:
Julian Wilkinson, Moore Stephens LLP
Tel: +44 (0)20 7334 9191