Shipping confidence hits three-year high
Overall confidence levels in the shipping industry rose to their highest level for more than three years over the three-month period to November 2013, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. There was encouraging news on freight rates, and evidence of an increased willingness to invest. But concern persists on overtonnaging, operating costs, and the cost of regulation.
In November 2013, the average confidence level expressed by respondents in the markets in which they operate was 6.1 on a scale of 1 (low) to 10 (high), compared to the 5.9 recorded in the previous survey in August 2013. This is the highest figure since the 6.2 recorded in August 2010. The survey was launched in May 2008 with a confidence rating of 6.8.
Despite the overall improvement in confidence, owners were the only category of individual respondent to post an increase this time, from 5.8 to 6.2, the highest figure recorded since May 2010. Confidence on the part of managers, however, was down from 6.2 to 6.1, while for charterers there was a drop from 6.3 to 5.7. Geographically, confidence was down in Asia (from 6.1 to 5.9) but up in Europe (from 5.9 to 6.1) and in North America, from 6.0 to 6.6.
The mood of optimism apparent in a number of responses was typified by the respondent who noted, “We clearly see an upswing in the markets when talking to various people at various locations in the last couple of months. There is, for the first time in a long while, a general feeling of optimism. Furthermore, the economic indicators, both small and large, all over the world, are pointing in the direction of recovery. We cannot expect it to reach the same levels as in 2007/2008, but a sustainable level of confidence is much better than skyrocketing markets because the higher you climb the lower you might fall.”
Another respondent pointed out, “The light we see at the end of the tunnel is not, as had been feared, a train coming towards us. We are quietly optimistic, with supply and demand seeming to come into balance, despite concerns over the amount of new orders being placed.”
One respondent emphasised, “A growing global economy, including the US and the EU, is crucial for an improved shipping market, and there are some good signs of that at the moment, which makes us hopeful for the future.” Another remarked, “We envisage the market growing in Asia, and in Brazil and Russia, typified by increasing imports of products for use in energy projects. We also see an increase in the use of gas as an alternative energy source, with many countries developing infrastructure and facilities to facilitate distribution.”
Others were slightly more guarded, such as the respondents who noted, “The shipping market will stay more or less at current levels well into next year as the world economic situation continues to fluctuate,” and, “The shipping industry in general is very weak at present, although we do expect improvements in 2014.” Others still remained pessimistic, such as the respondent who complained, “Shipping companies are facing a number of challenges, including low market rates caused by overtonnaging in a number of sectors, slow growth in the global economy, and increases in global ship operating costs.” Another noted, “Supply remains higher than demand, with significant falls in freight rates, while operating costs are always increasing. All this means that the shipping business is no longer attractive.”
Elsewhere it was noted, “Things are still pretty fragile, and it wouldn’t take much to knock many operators back into the hole again,” and, “We think the industry is stuck where it is for another year as available tonnage waits for an uplift in world trade.”
The overriding concern on the part of respondents once more related to the levels of excess tonnage both in the market and about to enter it. “There is too much shipbuilding capacity which, coupled with the entry of new investors, will lead to a continuation in the current oversupply of tonnage and low rates,” said one respondent. Another noted, “We need to convince owners to stop building ships, especially tankers,” while another observed, “There is a large surplus which is unlikely to be removed for two or three years.”
One respondent said, “Our principal concern is the perennial ability of owners to kill off improvements by increasing the supply of vessels in every sector,” while another feared, “The higher average rates we are likely to see in 2014 will be killed off by massive new deliveries in 2015.” Yet another observed, “Owners must be disciplined when placing new orders, even if they have the luxury of using other people’s money.”
Operating costs and the cost of regulatory compliance continued to concern respondents, one of whom noted, “Regulations to control emissions are commendable, and owners will have to adhere to them, but they will need financial support to compensate for the high cost of installing technologically advanced equipment to meet the requirements.” Another pointed out, “Regulatory requirements are still not fully factored into economic assessments, be they financing or investment decisions, and this will come back to haunt the industry.”
“Operating costs and the increasing cost of regulation are major factors,” noted one respondent, “and indeed the cost of additional regulation directly affects operating costs. There is a problem also with the supply of qualified crew, especially in certain niche markets, due to the ‘greying’ of the supply pool.” Another respondent simply said, “Low freight rates, high operating costs and costly regulations are killing us.”
The likelihood of respondents making a major investment or significant development over the next twelve months was up on the previous survey, on a scale of 1 to 10, from 5.5 to 5.8 which, as with overall confidence, is the highest figure recorded since August 2010. The figure for managers was up from 5.8 to its highest ever figure of 6.1, while that for owners was also up, from 5.8 to 6.0. Although charterers recorded a fall, from 6.7 to 6.4, they remain the most optimistic category of respondent in terms of the likelihood of making a new investment.
The number of managers rating the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0, or higher, was up from 45 per cent to 51 per cent, while the number of owners who thought likewise was up by one percentage point from 47 per cent to 48 per cent. The percentage of charterers of like mind, however, was down from 72 per cent to 45 per cent. Geographically, expectation levels of major investments were up in both Asia and Europe, from 5.5 to 5.7 and from 5.6 to 5.8 respectively, and in North America from 5.0 to 5.8.
One respondent said, “While earnings and income are low, there is still a great deal of activity involving planning and preparing for the future, and indeed we are investing with a very positive attitude.” Another noted, “Some major owners have the funds available to acquire tonnage. But the key is timing, and too many big shipping companies are intent on looking good on paper despite the fact that they are actually drowning.”
A number of respondents referred to the increasing involvement in the industry of non-shipping investors. One said, “The risk of overcapacity in all sectors has increased now that so many non-shipping investors have discovered the shipping market”, while another noted, “Over the past five years we have seen a lot of non-shipping investors enter the market, and they have now seen that shipping is not an easy business. But we are hopeful for the future, and now is certainly not the time to leave the table.”
Demand trends, competition and finance costs once again featured as the top three factors cited by respondents overall as those likely to influence performance most significantly over the coming twelve months. The overall numbers for demand trends and finance costs were down by one percentage point to 23 per cent and 15 per cent respectively, while competition was unchanged at 19 per cent. Tonnage supply (unchanged at 13 per cent) featured in fourth place, ahead of fuel costs (static at 10 per cent) and operating costs, another non-mover, at 9 per cent.
Demand trends remained the number one performance-affecting factor for owners, unchanged at 25 per cent. Tonnage supply, meanwhile, was up one percentage point to 17 per cent in joint-second place with finance costs, up 2 percentage points. For managers, meanwhile, competition was in first place, up 2 percentage points to 22 per cent, the highest figure in the life of the survey. Demand trends, unchanged at 15 per cent, featured in second place ahead of finance costs, down four percentage points to 14 per cent.
For charterers, demand trends, although down by 7 percentage points to 26 per cent, featured in first place, ahead of competition (up 2 percentage points to 22 per cent), and tonnage supply, unchanged at 16 per cent.
Geographically, demand trends were the most significant factor for respondents in Asia (up by one percentage point to 24 per cent), Europe (down to 22 per cent from 24 per cent) and North America (up by 3 percentage points to 35 per cent, the highest figure recorded since the survey was launched). Competition and finance costs, in that order, made up the top three performance-affecting factors in both Asia and Europe, while in North America it was competition and tonnage supply.
There was a one percentage-point fall (from 41 per cent to 40 per cent) in the number of respondents overall who expected finance costs to increase over the next twelve months. The number of respondents expecting finance costs to come down, meanwhile, fell by two percentage points to 9 per cent, which was nevertheless still the second-highest figure recorded in this regard since August 2011. Owners were the only main category to record an increase in the numbers of respondents expecting higher finance costs (up from 36 per cent to 41 per cent). The figure for brokers was down from 50 per cent to 36 per cent, while both managers (down from 44 per cent to 40 per cent) and charterers (down ten percentage points to 28 per cent) recorded all-time survey lows in this respect.
The number of respondents in Asia anticipating an increase in the cost of finance fell by 4 percentage points to 49 per cent, while in Europe the numbers were up from 33 per cent to 35 per cent. In North America, meanwhile, the numbers anticipating higher finance costs fell sharply from 57 per cent to 33 per cent.
One respondent said, “Financing is a big problem”, while another noted, “It is difficult to finance new projects, given unsatisfactory returns on investment and perceived risk levels on the part of banks.”
Turning to the freight markets, there was, for the second survey in succession, an increased expectation of higher rates in the tanker and dry bulk sectors. One respondent claimed, “Rates have not reached this level since October 2008.” In the container ship market, meanwhile, confidence was maintained at existing levels.
The number of respondents overall who expressed an expectation of higher rates in the tanker sector over the next twelve months was up by 5 percentage points to 43 per cent, the highest figure since May 2011. Owners led the way, with 52 per cent anticipating higher rates, as opposed to 37 per cent last time. Managers’ expectations in this regard were up by one percentage point to 37 per cent, but 40 per cent of brokers (as opposed to 35 per cent last time) thought that tanker rates were likely to go up over the coming year. Charterers, however, were of a different mind, with the number anticipating higher tanker rates falling from 43 per cent to 36 per cent.
Geographically, the prospects for increased tanker rates were deemed higher this time by respondents in Asia (up from 39 per cent to 46 per cent), in Europe (up from 36 per cent to 40 per cent) and in North America (up by 40 percentage points to 83 per cent).
In the dry bulk sector, meanwhile, there was a 14 percentage-point increase, to 56 per cent, in the overall numbers of those anticipating rate increases. This is the highest figure recorded in the life of the survey, and 100 per cent up on the corresponding figure when the survey was launched in 2008. Managers, up by 22 percentage points to a survey high of 60 per cent, led the way, followed by owners, up 6 percentage points to 58 per cent, another all-time high. Even charterers, recording a 5 percentage-point increase to 47 per cent, and brokers (up by 25 percentage points to 46 per cent) were looking on the bright side.
Expectations of higher dry bulk rates over the next twelve months were up to all-time survey highs in both Asia and Europe, rising by 21 per cent and 13 per cent respectively to levels of 63 per cent and 55 per cent. The numbers were also up, by 8 percentage points to 64 per cent, in North America.
One respondent said, “The dry cargo market is coming into balance and, with the new eco-ships on the way, everything looks very positive for those owners who have the right fleet profile and minimal counter-party risk.” Elsewhere, however, it was noted, “Strong dry bulk markets can only last for a very short time, making it difficult to compensate for the poor market conditions we have seen in recent years.”
In the container ship market, the numbers expecting rates to increase over the coming twelve months was unchanged at 30 per cent. Owners’ expectations were up by 3 percentage points on last time to 30 per cent, while optimism in this regard on the part of brokers rose from 25 per cent to 29 per cent. The expectations of managers rose two percentage points to 30 per cent, while those of charterers held steady, also at 30 per cent. Geographically, expectations of improved container ship rates were up by 3 percentage points in Asia to 36 per cent, by 9 percentage points in North America to 44 per cent, and unchanged in Europe at 27 per cent.
One respondent made the extravagant claim that, “All non-operator-owned container ships need to be removed from the market, so that over-supply can be corrected.”
Moore Stephens shipping partner, Richard Greiner, says, “The findings of this latest survey provide more good news for the shipping industry. It is now fifteen months since we recorded a decline in shipping confidence. There is an old adage which says that confidence is contagious. If that is true, shipping certainly seems to have caught the bug.
“It was noticeable on this occasion that, in contrast to previous surveys, very few of our respondents referred to the effect that the global economic and political situation is having on their business. This does not mean, of course, that those problems have gone away. But it is a clear indication that they are perceived to be improving, to the extent that the industry is now focusing on issues closer to home, and moreover on problems where they can realistically contribute towards helping to find a solution.
“Those problems represent a significant challenge for the shipping industry. Moreover, they continue to have a familiar ring to them. There are still too many ships for the cargoes available on many trades. There is not the ready access to bank finance that many would like. Operating costs are expected to rise over the next two years, following the fall for 2012 recorded by Moore Stephens’ ship operating costs benchmark study OpCost. Crew wages are only moving in one direction. The cost of keeping up with regulatory compliance is now a big-ticket item. And P&I premiums are on the increase.
“These problems will not go away. But the prospect of being able to fund them properly is brighter now than for some time. Expectations of improved rates in the dry bulk sector are now higher than at any time in the last five years, while in the tanker market the mood is at its most bullish for two and a half years. In the container trades, things are meanwhile holding up well. In short, there should be more money about next year, although no shortage of things to spend it on.
“Some of that money will have to be spent on compliance and on increased operating costs, but there could be some over for new investment, expectations of which are running at their highest survey levels for two and a half years. That is good news, particularly when viewed together with indications of the increasing interest being shown in shipping by non-industry investors. The latter, of course, can bring problems of its own, but in principle the prospect of new money coming into shipping should be a good thing.
“Whatever the level of new money coming in, the vast majority of players who have survived the downturn of the past five years are very much old money in terms of their industry experience. They have taken the worst that can be thrown at them and are still standing. That means that they have committed to operating in a cleaner and leaner shipping industry, and to meeting the costs that go with it. Provided the evidence of improved confidence that we are seeing does not turn out to be a false dawn, they can reasonably expect to reap better rewards over the coming years than they have for some time.”
The Moore Stephens Shipping Confidence Survey includes responses from key players worldwide in the international shipping industry to a targeted, web-based survey by the Moore Stephens Shipping Industry Group. Responses were received from owners, charterers, brokers, advisers, managers and others. Editors can apply for a copy of the survey by emailing chris@merlinco.com
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 634 offices of independent member firms in over 100 countries, employing 23,693 people and generating revenues in 2012 of $2.5 billion. www.moorestephens.co.uk
In November 2013, the average confidence level expressed by respondents in the markets in which they operate was 6.1 on a scale of 1 (low) to 10 (high), compared to the 5.9 recorded in the previous survey in August 2013. This is the highest figure since the 6.2 recorded in August 2010. The survey was launched in May 2008 with a confidence rating of 6.8.
Despite the overall improvement in confidence, owners were the only category of individual respondent to post an increase this time, from 5.8 to 6.2, the highest figure recorded since May 2010. Confidence on the part of managers, however, was down from 6.2 to 6.1, while for charterers there was a drop from 6.3 to 5.7. Geographically, confidence was down in Asia (from 6.1 to 5.9) but up in Europe (from 5.9 to 6.1) and in North America, from 6.0 to 6.6.
The mood of optimism apparent in a number of responses was typified by the respondent who noted, “We clearly see an upswing in the markets when talking to various people at various locations in the last couple of months. There is, for the first time in a long while, a general feeling of optimism. Furthermore, the economic indicators, both small and large, all over the world, are pointing in the direction of recovery. We cannot expect it to reach the same levels as in 2007/2008, but a sustainable level of confidence is much better than skyrocketing markets because the higher you climb the lower you might fall.”
Another respondent pointed out, “The light we see at the end of the tunnel is not, as had been feared, a train coming towards us. We are quietly optimistic, with supply and demand seeming to come into balance, despite concerns over the amount of new orders being placed.”
One respondent emphasised, “A growing global economy, including the US and the EU, is crucial for an improved shipping market, and there are some good signs of that at the moment, which makes us hopeful for the future.” Another remarked, “We envisage the market growing in Asia, and in Brazil and Russia, typified by increasing imports of products for use in energy projects. We also see an increase in the use of gas as an alternative energy source, with many countries developing infrastructure and facilities to facilitate distribution.”
Others were slightly more guarded, such as the respondents who noted, “The shipping market will stay more or less at current levels well into next year as the world economic situation continues to fluctuate,” and, “The shipping industry in general is very weak at present, although we do expect improvements in 2014.” Others still remained pessimistic, such as the respondent who complained, “Shipping companies are facing a number of challenges, including low market rates caused by overtonnaging in a number of sectors, slow growth in the global economy, and increases in global ship operating costs.” Another noted, “Supply remains higher than demand, with significant falls in freight rates, while operating costs are always increasing. All this means that the shipping business is no longer attractive.”
Elsewhere it was noted, “Things are still pretty fragile, and it wouldn’t take much to knock many operators back into the hole again,” and, “We think the industry is stuck where it is for another year as available tonnage waits for an uplift in world trade.”
The overriding concern on the part of respondents once more related to the levels of excess tonnage both in the market and about to enter it. “There is too much shipbuilding capacity which, coupled with the entry of new investors, will lead to a continuation in the current oversupply of tonnage and low rates,” said one respondent. Another noted, “We need to convince owners to stop building ships, especially tankers,” while another observed, “There is a large surplus which is unlikely to be removed for two or three years.”
One respondent said, “Our principal concern is the perennial ability of owners to kill off improvements by increasing the supply of vessels in every sector,” while another feared, “The higher average rates we are likely to see in 2014 will be killed off by massive new deliveries in 2015.” Yet another observed, “Owners must be disciplined when placing new orders, even if they have the luxury of using other people’s money.”
Operating costs and the cost of regulatory compliance continued to concern respondents, one of whom noted, “Regulations to control emissions are commendable, and owners will have to adhere to them, but they will need financial support to compensate for the high cost of installing technologically advanced equipment to meet the requirements.” Another pointed out, “Regulatory requirements are still not fully factored into economic assessments, be they financing or investment decisions, and this will come back to haunt the industry.”
“Operating costs and the increasing cost of regulation are major factors,” noted one respondent, “and indeed the cost of additional regulation directly affects operating costs. There is a problem also with the supply of qualified crew, especially in certain niche markets, due to the ‘greying’ of the supply pool.” Another respondent simply said, “Low freight rates, high operating costs and costly regulations are killing us.”
The likelihood of respondents making a major investment or significant development over the next twelve months was up on the previous survey, on a scale of 1 to 10, from 5.5 to 5.8 which, as with overall confidence, is the highest figure recorded since August 2010. The figure for managers was up from 5.8 to its highest ever figure of 6.1, while that for owners was also up, from 5.8 to 6.0. Although charterers recorded a fall, from 6.7 to 6.4, they remain the most optimistic category of respondent in terms of the likelihood of making a new investment.
The number of managers rating the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0, or higher, was up from 45 per cent to 51 per cent, while the number of owners who thought likewise was up by one percentage point from 47 per cent to 48 per cent. The percentage of charterers of like mind, however, was down from 72 per cent to 45 per cent. Geographically, expectation levels of major investments were up in both Asia and Europe, from 5.5 to 5.7 and from 5.6 to 5.8 respectively, and in North America from 5.0 to 5.8.
One respondent said, “While earnings and income are low, there is still a great deal of activity involving planning and preparing for the future, and indeed we are investing with a very positive attitude.” Another noted, “Some major owners have the funds available to acquire tonnage. But the key is timing, and too many big shipping companies are intent on looking good on paper despite the fact that they are actually drowning.”
A number of respondents referred to the increasing involvement in the industry of non-shipping investors. One said, “The risk of overcapacity in all sectors has increased now that so many non-shipping investors have discovered the shipping market”, while another noted, “Over the past five years we have seen a lot of non-shipping investors enter the market, and they have now seen that shipping is not an easy business. But we are hopeful for the future, and now is certainly not the time to leave the table.”
Demand trends, competition and finance costs once again featured as the top three factors cited by respondents overall as those likely to influence performance most significantly over the coming twelve months. The overall numbers for demand trends and finance costs were down by one percentage point to 23 per cent and 15 per cent respectively, while competition was unchanged at 19 per cent. Tonnage supply (unchanged at 13 per cent) featured in fourth place, ahead of fuel costs (static at 10 per cent) and operating costs, another non-mover, at 9 per cent.
Demand trends remained the number one performance-affecting factor for owners, unchanged at 25 per cent. Tonnage supply, meanwhile, was up one percentage point to 17 per cent in joint-second place with finance costs, up 2 percentage points. For managers, meanwhile, competition was in first place, up 2 percentage points to 22 per cent, the highest figure in the life of the survey. Demand trends, unchanged at 15 per cent, featured in second place ahead of finance costs, down four percentage points to 14 per cent.
For charterers, demand trends, although down by 7 percentage points to 26 per cent, featured in first place, ahead of competition (up 2 percentage points to 22 per cent), and tonnage supply, unchanged at 16 per cent.
Geographically, demand trends were the most significant factor for respondents in Asia (up by one percentage point to 24 per cent), Europe (down to 22 per cent from 24 per cent) and North America (up by 3 percentage points to 35 per cent, the highest figure recorded since the survey was launched). Competition and finance costs, in that order, made up the top three performance-affecting factors in both Asia and Europe, while in North America it was competition and tonnage supply.
There was a one percentage-point fall (from 41 per cent to 40 per cent) in the number of respondents overall who expected finance costs to increase over the next twelve months. The number of respondents expecting finance costs to come down, meanwhile, fell by two percentage points to 9 per cent, which was nevertheless still the second-highest figure recorded in this regard since August 2011. Owners were the only main category to record an increase in the numbers of respondents expecting higher finance costs (up from 36 per cent to 41 per cent). The figure for brokers was down from 50 per cent to 36 per cent, while both managers (down from 44 per cent to 40 per cent) and charterers (down ten percentage points to 28 per cent) recorded all-time survey lows in this respect.
The number of respondents in Asia anticipating an increase in the cost of finance fell by 4 percentage points to 49 per cent, while in Europe the numbers were up from 33 per cent to 35 per cent. In North America, meanwhile, the numbers anticipating higher finance costs fell sharply from 57 per cent to 33 per cent.
One respondent said, “Financing is a big problem”, while another noted, “It is difficult to finance new projects, given unsatisfactory returns on investment and perceived risk levels on the part of banks.”
Turning to the freight markets, there was, for the second survey in succession, an increased expectation of higher rates in the tanker and dry bulk sectors. One respondent claimed, “Rates have not reached this level since October 2008.” In the container ship market, meanwhile, confidence was maintained at existing levels.
The number of respondents overall who expressed an expectation of higher rates in the tanker sector over the next twelve months was up by 5 percentage points to 43 per cent, the highest figure since May 2011. Owners led the way, with 52 per cent anticipating higher rates, as opposed to 37 per cent last time. Managers’ expectations in this regard were up by one percentage point to 37 per cent, but 40 per cent of brokers (as opposed to 35 per cent last time) thought that tanker rates were likely to go up over the coming year. Charterers, however, were of a different mind, with the number anticipating higher tanker rates falling from 43 per cent to 36 per cent.
Geographically, the prospects for increased tanker rates were deemed higher this time by respondents in Asia (up from 39 per cent to 46 per cent), in Europe (up from 36 per cent to 40 per cent) and in North America (up by 40 percentage points to 83 per cent).
In the dry bulk sector, meanwhile, there was a 14 percentage-point increase, to 56 per cent, in the overall numbers of those anticipating rate increases. This is the highest figure recorded in the life of the survey, and 100 per cent up on the corresponding figure when the survey was launched in 2008. Managers, up by 22 percentage points to a survey high of 60 per cent, led the way, followed by owners, up 6 percentage points to 58 per cent, another all-time high. Even charterers, recording a 5 percentage-point increase to 47 per cent, and brokers (up by 25 percentage points to 46 per cent) were looking on the bright side.
Expectations of higher dry bulk rates over the next twelve months were up to all-time survey highs in both Asia and Europe, rising by 21 per cent and 13 per cent respectively to levels of 63 per cent and 55 per cent. The numbers were also up, by 8 percentage points to 64 per cent, in North America.
One respondent said, “The dry cargo market is coming into balance and, with the new eco-ships on the way, everything looks very positive for those owners who have the right fleet profile and minimal counter-party risk.” Elsewhere, however, it was noted, “Strong dry bulk markets can only last for a very short time, making it difficult to compensate for the poor market conditions we have seen in recent years.”
In the container ship market, the numbers expecting rates to increase over the coming twelve months was unchanged at 30 per cent. Owners’ expectations were up by 3 percentage points on last time to 30 per cent, while optimism in this regard on the part of brokers rose from 25 per cent to 29 per cent. The expectations of managers rose two percentage points to 30 per cent, while those of charterers held steady, also at 30 per cent. Geographically, expectations of improved container ship rates were up by 3 percentage points in Asia to 36 per cent, by 9 percentage points in North America to 44 per cent, and unchanged in Europe at 27 per cent.
One respondent made the extravagant claim that, “All non-operator-owned container ships need to be removed from the market, so that over-supply can be corrected.”
Moore Stephens shipping partner, Richard Greiner, says, “The findings of this latest survey provide more good news for the shipping industry. It is now fifteen months since we recorded a decline in shipping confidence. There is an old adage which says that confidence is contagious. If that is true, shipping certainly seems to have caught the bug.
“It was noticeable on this occasion that, in contrast to previous surveys, very few of our respondents referred to the effect that the global economic and political situation is having on their business. This does not mean, of course, that those problems have gone away. But it is a clear indication that they are perceived to be improving, to the extent that the industry is now focusing on issues closer to home, and moreover on problems where they can realistically contribute towards helping to find a solution.
“Those problems represent a significant challenge for the shipping industry. Moreover, they continue to have a familiar ring to them. There are still too many ships for the cargoes available on many trades. There is not the ready access to bank finance that many would like. Operating costs are expected to rise over the next two years, following the fall for 2012 recorded by Moore Stephens’ ship operating costs benchmark study OpCost. Crew wages are only moving in one direction. The cost of keeping up with regulatory compliance is now a big-ticket item. And P&I premiums are on the increase.
“These problems will not go away. But the prospect of being able to fund them properly is brighter now than for some time. Expectations of improved rates in the dry bulk sector are now higher than at any time in the last five years, while in the tanker market the mood is at its most bullish for two and a half years. In the container trades, things are meanwhile holding up well. In short, there should be more money about next year, although no shortage of things to spend it on.
“Some of that money will have to be spent on compliance and on increased operating costs, but there could be some over for new investment, expectations of which are running at their highest survey levels for two and a half years. That is good news, particularly when viewed together with indications of the increasing interest being shown in shipping by non-industry investors. The latter, of course, can bring problems of its own, but in principle the prospect of new money coming into shipping should be a good thing.
“Whatever the level of new money coming in, the vast majority of players who have survived the downturn of the past five years are very much old money in terms of their industry experience. They have taken the worst that can be thrown at them and are still standing. That means that they have committed to operating in a cleaner and leaner shipping industry, and to meeting the costs that go with it. Provided the evidence of improved confidence that we are seeing does not turn out to be a false dawn, they can reasonably expect to reap better rewards over the coming years than they have for some time.”
The Moore Stephens Shipping Confidence Survey includes responses from key players worldwide in the international shipping industry to a targeted, web-based survey by the Moore Stephens Shipping Industry Group. Responses were received from owners, charterers, brokers, advisers, managers and others. Editors can apply for a copy of the survey by emailing chris@merlinco.com
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 634 offices of independent member firms in over 100 countries, employing 23,693 people and generating revenues in 2012 of $2.5 billion. www.moorestephens.co.uk
Labels: finance, freight rates, investment, Moore Stephens, newbuildings, regulation, shipping industry confidence
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