Shipping confidence dips as trade wars intensify

Confidence in the shipping industry fell in the past three months to its lowest level for two and half years, according to the latest Shipping Confidence Survey from leading shipping adviser and accountant BDO. Yet owners, charterers and managers were more confident than they were at the time of the previous survey in May 2019.

The average confidence level recorded by the survey in the three months to end-August 2019 was 5.8 out of a possible maximum of 10.0. This compares to the figure of 6.1 recorded for the quarter ended May 2019.

Confidence was highest in the chartering sector (up from 6.2 to 7.0), while the increased ratings for owners and managers were from 6.3 to 6.4 and from 5.8 to 5.9, respectively. The rating for brokers, however, was down from 5.7 to 5.1.

Confidence was up in Asia from 6.0 to 6.8 – the highest figure for this region since the survey was launched in May 2008 with an overall rating for all respondents in all geographical areas of 6.8 out of 10.0. The rating for Europe, however, was down, from 6.1 to 5.7.

According to the BDO survey, the likelihood of respondents making a major investment or significant development over the coming year was up from 5.4 to 5.5 out of 10.0. Charterers’ confidence in this regard was up from 5.6 to 6.8, and owners’ from 6.3 to 6.5. The ratings for managers and brokers were also up, from 4.8 to 6.1 and from 3.9 to 4.4, respectively. Expectations were up in Asia (from 5.5 to 6.6) whilst in Europe they were unchanged at 5.4.

The number of respondents expecting finance costs to increase over the coming year was down from 48% to 25%. The figures for all major categories of respondent were down, and in the case of owners and managers to survey lows of 27% and 20%, respectively.

Demand trends were cited by 23% of respondents as the factor most likely to influence performance over the next 12 months. Competition (20%) and finance costs (16%) featured in second and third place respectively in this context.

In the freight markets, the number of respondents expecting higher tanker rates over the coming year was down by 12 percentage points to 43%, with the rating for charterers tumbling from 75% to just 25%. In the dry bulk sector, expectations of rate increases were down from 48% to 39%, with charterers again recording the most marked decrease, from 80% to 25%. The numbers expecting higher container ship rates, meanwhile, fell from 35% to 19%. Net rate sentiment was positive in the tanker and dry bulk sectors, but negative in the container ship market.

Responding to a stand-alone survey question, 26% of respondents said they expected the price differential between high-sulphur fuel oil and IMO-compliant low-sulphur fuel oil at 1 January 2020 to be between $175 and $249 per metric tonne. This compares to the 23% who thought likewise in November 2018. 24% put the figure at between $100 and $174, compared to 12% previously, while 17% estimated the cost at between $250 and $324 compared to 24% last time.

Richard Greiner, Partner, Shipping & Transport at BDO, says: “Geopolitical uncertainty contributed significantly to the decline in confidence recorded in our latest survey, with a number of respondents expressing concern about burgeoning trade wars and political tension in various parts of the world. Ongoing indecision surrounding Brexit was also a salient factor.

“But it was not all bad news. Confidence on the part of owners, charterers and managers was up in the last three months, as was the likelihood of imminent major investment – in the case of owners, to an all-time survey high.

“Indications from the freight markets were less encouraging, with a fall in expectations of higher rates in all three main tonnage categories. Indeed, net rate sentiment was negative in the container ship sector for the first time in almost four years. But shipping confidence must be weighed against the highly cyclical nature of the industry. Not every reversal in fortunes is a portent of significant decline.

“Major challenges lie ahead, some of which will be beyond the control of the industry itself. But there will always be a role for the shipping industry, and particularly for one that is technically inventive and environmentally compliant and thereby attractive to investors.”

The BDO (formerly Moore Stephens LLP) Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide.

BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions.

https://www.bdo.co.uk/en-gb/industries/shipping-and-transport


BDO LLP
BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
Contacts
Press office:
+44(0)20 7893 3000
media@bdo.co.uk

http://www.bdo.uk.com/news.html
http://twitter.com/BDOaccountant

Concern over trade wars impacts shipping confidence

Confidence in the shipping industry has fallen marginally over the past three months, largely as a result of ongoing concern over trade wars and increased regulation, according to the latest Shipping Confidence Survey from leading shipping adviser and accountant BDO.

The average confidence level in the three months to May 2019 was 6.1 out of a possible maximum of 10.0. This is slightly down on the figure of 6.2 recorded in February 2019.

Confidence was up in Asia, from 5.8 to 6.0, and in North America, from 5.6 to 6.4. In Europe, meanwhile, there was a drop in overall confidence levels from 6.3 to 6.1.

The chartering sector continues to be the most volatile in terms of respondent confidence, with ratings varying between 4.7 and 7.7 during the past two years. This time, the confidence level was up to 6.2 from 6.0 three months ago. The ratings for owners and managers, meanwhile, were unchanged at 6.3 and 5.8 respectively, while the rating for brokers was down from 5.9 to 5.7.

The survey was launched in May 2008 with an overall rating for all respondents of 6.8 out of 10.0.

According to the BDO quarterly survey, the likelihood of respondents making a major investment or significant development over the coming year was up from 5.3 to 5.4 out of 10.0. Owners’ confidence in this regard was up from 5.4 to 6.3, while the rating for charterers was 5.6 compared to the survey high of 7.3 recorded last time. The confidence of managers and brokers in this category was also down, from 5.6 to 4.8 and from 4.9 to 3.9 respectively. Expectations were up in Asia, from 5.2 to 5.5, and in Europe, from 5.3 to 5.4.

The number of respondents who expected finance costs to increase over the coming year was unchanged at 48%. The figures for owners and brokers were down, but up in the case of charterers and managers.

Demand trends were cited by 26% of respondents as the factor most likely to influence performance over the next 12 months. Competition (19%) and finance costs (13%) featured in second and third place respectively in this context.

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was up by 4 percentage points on the previous survey to 55%, with charterers (75%) leading the way. In the dry bulk sector, expectations of rate increases were down overall from 52% to 48%, with charterers the only category recording an increase in expectation levels. The numbers expecting higher container ship rates, meanwhile, rose by 9 percentage points to 35%. Net rate sentiment was positive in all three tonnage categories and noticeably improved on the last quarter for container ships.

When asked to estimate the level they expected the Baltic Dry Index (BDI) to reach in 12 months’ time, 50% of respondents (compared to 36 % 12 months ago) anticipated a figure of between 1000 and 1499, while 22% (42% last time) put the likely level at between 1500 and 1999. “One could be more bullish about the BDI if there was less global tension around,” said one respondent.

Richard Greiner, Partner, Shipping & Transport at BDO, says, “A small dip in confidence is not surprising given the recent volatility generated by the US-China trade wars, the heightened tension in the Arabian Gulf, the failure to conclude Brexit negotiations, and general political instability in many parts of the world. Markets love volatility, but it can have an adverse effect on confidence.

“Trade wars certainly formed the over-arching theme for this quarter, but they are not the only recurring topic. The cost and technical implications of complying with existing and incipient regulation was referenced on a number of occasions, typified by the respondent who noted that the high level of regulation “makes it extremely difficult to make a profit”.

“Despite the challenges the industry is facing, there are a number of positive indicators. New technology is making shipping more attractive to investors, and will moreover act as a trigger to accelerate the pace and extent of recycling. Higher freight rates should logically follow, and those who hold their nerve will ultimately benefit.”

The BDO (formerly Moore Stephens LLP) Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide.

BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions.

https://www.bdo.co.uk/en-gb/industries/shipping-and-transport


BDO LLP
BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has underlying revenues of £590m and is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
Contacts Press office:
+44(0)20 7893 3000
media@bdo.co.uk

http://www.bdo.uk.com/news.html
http://twitter.com/BDOaccountant

Young professionals say London shipping must be adaptable and competitive

A new survey by The Shipping Professional Network in London (SPNL) has found that London must adapt to a fast-changing environment and improve its competitive edge in order to remain a relevant global maritime centre. Respondents to the survey also identified access to the single market and freedom of movement as key negotiating issues for shipping in the UK’s exit from the European Union.

The survey, organised in conjunction with international accountant and shipping adviser Moore Stephens, canvassed the opinions of young professionals working primarily in the shipowning, shipbroking, shipmanagement, chartering, banking and ship finance, advisory and associated industries in London. Respondents were asked for their views of the current state of the market, and how they believed it would perform over the next 12 months. They were also asked to identify the key challenges facing London as a maritime centre, and which aspects of the Brexit negotiations they considered to be most important for the preservation and continued development of London as a centre of global maritime commerce.

Respondents recorded an overall confidence level of 6.1, out of a maximum possible score of 10.0, in the markets in which they operate. This compares with the rating of 6.2 recorded when the survey was run previously, in September 2015.

On a scale of 1 to 10, respondents expressed an overall expectation of 5.8 when asked to gauge the likelihood of their business making a major investment or significant development over the next 12 months. This was unchanged from two years ago.

Competition, demand trends, and the cost and availability of finance were identified by respondents as the three leading factors most likely to affect their business performance over the next 12 months. 55% of respondents expected finance costs to increase over the coming year, compared to the 48% who thought likewise in 2015.

Respondents were also asked for their opinion of likely rate movements in the tanker, dry bulk, container ship and offshore markets over the course of the next year. 31% overall thought that tanker rates were likely to increase, as against 35% in the 2015 survey. In the dry bulk sector, 60% of respondents expected rates to increase, compared to the 35% recorded in 2015. Meanwhile, 42% of respondents expected rates to rise during the next 12 months in the container ship market, compared to 29% in 2015, and 31% expected rates to rise in the offshore maritime market.

Respondents were provided with a list of key challenges facing London in order for it to remain a relevant global maritime centre, and asked to choose the three options which they considered to be most important, in order of priority. ‘Competitiveness’ (unchanged from the previous SPNL survey in 2015) and ‘Ability to adapt to a fast-changing environment’ (up from 17% on the 2015 figure) were each identified by 23% of respondents. ‘Taxation’ (unchanged at 18 %) was in third place.

The number of respondents who identified education as a key challenge was down from 11% to 9%, the same number who expressed concern about the likelihood of there being insufficient numbers of professionals and shipowners operating in London.

On the specific question of Brexit, 21% of respondents identified access to the single market as the most important issue in negotiations for the UK’s exit from the EU. Freedom of movement (18%) featured in second place, followed by taxation / VAT / customs duties (15%) and regulatory issues (10%). Other factors cited by respondents included the legal framework (9%), passporting rights (8%), political sanctions and competition law (both 7%) and dispute resolution (6%).

Claudio Chistè, Chairman of SPNL, says: “The past two years have seen a continuation of the extremely difficult conditions which have plagued global economies since the beginning of the financial downturn in 2008. So it is not surprising that the level of confidence expressed by young shipping professionals working in the London market has declined, albeit very slightly, over the past two years.

“At a time of great uncertainty and change in many parts of the world, every major decision in shipping has to be weighed in the political and environmental scales, as well as the economic ones. And every decision should be made in the knowledge that, in many trades, there are too many ships operating at below-break-even rates, with the inevitable result that not everybody engaged in those trades is going to make money.

“Other, more recent issues may seem less pressing by comparison, but they are assuming increasing importance. Cyber-crime, for example, was barely considered as a significant threat to the industry two years ago. Now it is very near the top of the list in the minds of many. The next two years will also be highly instructive when it comes to footing the bill for compliance with the Ballast Water Management Convention.

“With these new problems, it is just as well that the new generation of shipping professionals continues to expand, bringing with it an approach which is fresh yet still informed by the older generation of professionals which has seen the shipping industry through many years of cyclical promise and disappointment. It is encouraging that talented young professionals are still attracted to the industry. This is just as it should be because, despite the problems, the net sentiment gleaned from our survey in terms of the prospects for rate improvements over the next 12 months is positive in the three main tonnage categories. Moreover, respondents to our survey rated the prospect of their business making a major investment over the next 12 months at 5.8 out of a possible 10.0.

“Today’s shipping professionals have to deal with Brexit and the massive potential implications for their future. SPNL members were divided in their views about whether Brexit would be good or bad for London as a maritime centre. Similarly, there was a divergence of opinion as to how best London can confront the issues it faces in terms of competition from other global shipping centres.

“It is not only about cost. It is also about service, flexibility, experience and tradition. London needs its cadre of young maritime professionals, and over time those young professionals will become the older generation of London-based expertise and experience. The next generation of professionals in London needs to rise to the new challenges as previous generations have done over the centuries.”

The Shipping Professional Network in London (SPNL) was founded in 2007 as a meeting place for young shipping professionals in London. Its vision is to promote and enhance London as a maritime financial centre, and to be the 'voice' of young shipping professionals in London by engaging with the broader shipping community.


Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as one of the leading shipping, offshore maritime and transport & logistics advisers. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk


For more information:
Claudio Chistè
Chairman of SPNL
E: info@shippingnetwork.co.uk
W: www.spnl.co.uk

Shipping confidence softens amid concerns about overtonnaging

Overall confidence levels in the shipping industry fell slightly during the three-month period to May 2014 but remain at their second-highest level for the past six years, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. Expectations of new investment were maintained over the three-month period, but the prospect for higher freight rates softened in the tanker and dry bulk sectors. Uncertainty over the likely effect of an increase in private equity funding, and the consequent potential impact on tonnage supply, meanwhile dominated the thoughts of respondents to the survey.

In May 2014, the average confidence level expressed by respondents in the markets in which they operate was 6.3 on a scale of 1 (low) to 10 (high), compared to the 6.5 recorded in February 2014, which was the highest figure since the 6.8 recorded when the survey was launched in May 2008.

Ship managers (up from 6.4 in the previous survey to 6.5 this time) were the only category of main respondent to report an increase in confidence. Owners (down from 6.6 to 6.1), charterers (down from 6.5 to 6.1) and brokers (down from 6.4 to 6.0) were less confident than they were three months previously.

Geographically, confidence was stable in Asia at 6.4, but down in Europe and in North America, from 6.4 to 6.2 and from 7.1 to 6.5, respectively.

Despite the small overall decline in confidence levels, a number of respondents to the survey remained upbeat. “Levels of confidence are good, and are expected to improve,” said one, while another noted, “World trade seems to be improving, and shipping will benefit.” Others were slightly more guarded in their responses, however. One respondent said, “The market is improving, but there are still some smaller, financially weak companies likely to go bust.” Another observed, “We have noted slight improvements in the market and are confident that more significant growth will take place in the coming months,” while others still remarked, “Demand is still high, even though operational costs have tended to increase,” and, “The shipping markets are not stable at the moment, but will pick up shortly.”

“Confidence is lower today than at the start of the year, but still reasonably optimistic going forward,” said one respondent. “Some believe we are sailing out of the doldrums, while others believe we will never get out. Interesting times!” Another noted, “The market has improved slightly, but certainly not enough to start drinking champagne. The next few years will be difficult, and maybe the real recovery will be too little and come too late for some owners.”

Elsewhere it was noted, “The market has held up for longer in 2014 than it has in the past few years, but one can sense that it is slowing down now. Hopefully, though, we are now seeing the results of more vessels being scrapped, and rates should be more robust and won’t tumble over the quieter summer months.” Similarly, another respondent said, “Shipping is moving slowly at the moment and will continue in that vein over the summer months before increasing pace again later in the year.”

Concern about overtonnaging, meanwhile, continued apace. “The market is a little more stable, said one respondent, “but we need to stop ordering newbuildings, particularly in the medium-range tanker and platform supply vessel sectors.” Of like mind, another respondent cautioned, “The future is uncertain due to the fact that owners are still ordering too many ships. Also, economic factors are changing trade patterns once more, and the markets are likely to remain volatile, with a tendency towards downward movement, until 2016 and beyond.”

Continuing the theme, another respondent warned, “Concerns are growing about the number of newbuildings relative to the size of the existing fleet,” while another still emphasised, “We must not have large numbers of orders for new ships for the next two years, at least.” Summing up the feelings of a number of others, one respondent warned, “An improvement in the freight markets is long overdue, but more new tonnage is on order despite the general consensus that there is already an over-supply.” Offering a slightly different slant on the situation, it was observed elsewhere that, “A lot will depend on developments in the Far East, and on the ability of Chinese shipyards to meet their orderbooks in timely fashion and to be able to assist with financing.”

The increasing availability of non-traditional ship finance, and of private equity funding in particular, dominated the thoughts of a number of respondents. One said, “The biggest risk is that uneducated and inexperienced new capital is available to the industry, which could lead to a new period of over-supply.” In similar vein, another remarked, “A high degree of uncertainty hangs over the supply side equation, with private equity keen to engage, and the continuing risk of state-sponsored ordering.”

Elsewhere it was noted, “Thankfully, the IPO window seems to have closed slightly, but any reactivation on the part of private equity companies, or further investment in new ships by public companies, will be very detrimental in the long term to shipping markets. Collective lessons have not been learned. As long as interest rates are low and money is cheap, hard assets will be sought and once again too many ships will be built and in the process lay the foundations for a very depressed market for years ahead.” Another respondent emphasised, “Amid ongoing overcapacity, the trend towards private equity and other non-traditional ship finance significantly threatens any recovery which may otherwise materialise from stronger forward demand trends.”

“The increasing involvement of ‘other people’s money’,” it was noted elsewhere, “has been a major factor in the newbuilding order splurge over the last nine months. Will seaborne trade growth in the underlying major commodities support this, or is the industry suffering from another of its bouts of wishful thinking?” One respondent referred to the entry into the market of “speculators who will drive up order books and subsequently increase overcapacity,” while another warned, “Short-term, non-shipping investors ordering new ships, some with other people’s money, will increase tonnage supply for years to come.” Finally, it was noted, “We have a new brand of so-called owners, or rather investors ordering tonnage on the basis of spur-of-the-moment decisions.”

The likelihood of respondents making a major investment or significant development over the next twelve months was unchanged on the previous survey, on a scale of 1 to 10, at 5.8, which equals the highest figure since the rating of 6.0 recorded in August 2010. The figure for managers was up on last time, from 6.0 to 6.2, and for charterers, from 6.3 to 6.4. But owners were slightly down on last time, from 5.9 to 5.8, as were brokers, from 5.4 to 5.2.

Sixty-eight per cent per cent of charterers (up from 50 per cent last time) rated the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0 or higher. The numbers of owners and managers of like mind were 43 per cent and 56 per cent respectively, up on the corresponding figures of 47 per cent and 43 per cent last time.

Geographically, expectation levels of major investments were up in Asia, from 5.7 to 5.9 (the highest figure for four years), but down in Europe, from 5.8 to 5.7. Meanwhile, there was an increase, from 5.1 to 5.9, in North America, where 62 per cent of respondents rated the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0 or higher.

One respondent said, “Recent new investment in over-built shipping asset classes represents a threat to shipping,” while another noted, “Potential buyers are finding it difficult to secure loans to buy ships.”

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 number for demand trends was up by 2 percentage points to 23 per cent, while competition was up by one percentage point to 20 per cent. Meanwhile, the number of respondents citing finance costs fell from 16 per cent to 15 per cent. Tonnage supply (unchanged at 13 per cent) featured in fourth place, while operating costs (down from 11 per cent to 10 per cent) and fuel costs (up one percentage point to 10 per cent) featured in equal fifth place.

Demand trends, up 5 percentage points to 27 per cent, remained the number one performance-affecting factor for owners. Finance costs, down 3 percentage point to 15 per cent, were replaced in second position by tonnage supply, unchanged at 17 per cent. For managers, meanwhile, competition (up 2 percentage points to 21 per cent) remained in first place. Operating costs, down 2 percentage points to 14 per cent, dropped to third place behind finance costs, unchanged at 15 per cent. For charterers, demand trends, up from 22 per cent to 30 per cent, featured in first place, ahead of competition (21 per cent) and finance costs (16 per cent).

Geographically, demand trends were the most significant factor for respondents in Asia (up from 20 per cent to 22 per cent), Europe (up 2 percentage points to 24 per cent) and North America (down from 24 per cent to 21 per cent). Competition was the second most significant performance-affecting factor in Asia (down one percentage point to 19 per cent), Europe (up from 18 per cent to 19 per cent), and North America (down from 23 per cent to 17 per cent). In Asia and North America, finance costs featured in third place, while for Europe that slot was occupied by tonnage supply.

One respondent noted, “The cost of paying and retaining professional staff remains high.” Another remarked, “The most alarming thing is the poor quality of crew.” A number of respondents were concerned about the cost of meeting regulatory requirements. One said, “Sulphur emissions restrictions and potential ballast water management systems costs are major challenges for the near future.”

The number of respondents overall who expected finance costs to increase over the next twelve months was unchanged at 41 per cent. The number of respondents expecting finance costs to come down, meanwhile, rose from 6 per cent to 13 per cent, the highest figure since August 2010. Managers were the only main category to record a fall in the numbers of respondents expecting higher finance costs (down from 42 per cent to 39 per cent). The figure for owners was up from 38 per cent to 42 per cent, for brokers from 39 per cent to 50 per cent, and for charterers from 35 per cent to 48 per cent.

The number of respondents in Asia anticipating an increase in the cost of finance was up by 8 percentage points to 56 per cent, while in Europe the numbers were down from 37 per cent to 34 per cent. In North America, meanwhile, the numbers anticipating higher finance costs rose from 29 per cent to 62 per cent.

“The banks need to change their policy,” said one respondent. “They have to support shipping, the biggest transport industry in the world, and lend against secondhand assets.” Another observed, “There is a lack of belief in the banking system.”

Turning to the freight markets, there was a fall in the number of respondents anticipating higher rates in the tanker and dry bulk trades, while expectations in the container ship sector remained unchanged from last time.

The number of respondents overall who expressed an expectation of higher rates in the tanker sector over the next twelve months was down by 2 percentage points to 41 per cent, which is nevertheless the second-highest figure since May 2011. Charterers recorded a 29 per cent fall in this regard, from 50 per cent to 21 per cent, while owners’ expectations were also down, from 42 per cent to 37 per cent. Brokers and managers, meanwhile, were more confident, their expectations of higher tanker rates increasing by 12 and 3 percentage points respectively to figures of 48 per cent and 46 per cent.

Geographically, the prospects for increased tanker rates were deemed lower this time by respondents in Asia (down from 43 per cent to 40 per cent), and in Europe (down from 43 per cent to 41 per cent). In North America, however, there was a 29 percentage-point increase to 50 per cent.

One respondent maintained, “The tanker and bulk carrier sectors are heavily influenced by low trading demand, and most trading routes worldwide are currently overtonnaged.” Another said, “There are too many newbuildings scheduled for delivery in the medium-range tanker sector.” Elsewhere it was noted, “The effects of rapid political developments within the EU have been under-estimated, and this will have an impact on tanker activity in the Western Europe/Mediterranean range.”

In the dry bulk sector, meanwhile, there was a 5 percentage-point fall, to 53 per cent, in the overall numbers of those anticipating rate increases. Just 42 per cent of charterers, compared to the survey high of 76 per cent last time, thought that rates would increase over the coming year. The numbers for owners were also down (from 59 per cent to 57), as were those for managers (from 57 per cent to 45 per cent) and brokers (from 62 per cent to 59 per cent. Expectations of higher dry bulk rates over the next twelve months were unchanged in Asia at 49 per cent, down in Europe from 64 per cent to 55 per cent, but up in North America from 47 per cent to 64 per cent.

One respondent said, “We are quite confident that, in the coming months, the dry cargo market overall will slowly but surely improve, after about six years of crisis.” Elsewhere it was noted, “The orderbook for bulk carriers is still quite high, but we believe there will be more scrapping due to the inefficiency of main engines, the price of fuel and the cost of retrofitting scrubbers.”

In the container ship market, meanwhile, the number of respondents expecting rates to increase over the coming twelve months was unchanged at 34 per cent. All main categories of respondent, with the exception of charterers, were more confident of rate increases this time than they were three months ago, with owners up from 34 per cent to 36 per cent, managers up from 33 per cent to 35 per cent, and brokers from 36 per cent to 41 per cent. For charterers, however, the figure was down from 50 per cent to 46 per cent.

Geographically, expectations of improved container ship rates were unchanged at 38 per cent in Asia, and up in Europe (from 31 per cent to 32 per cent) and in North America (from 27 per cent to 30 per cent).

Moore Stephens shipping partner, Richard Greiner, says, “The small dip in confidence revealed by the latest survey is a disappointment. But it has to be viewed in context. Confidence is still at its second-highest level for four years, and the number of respondents planning to make a major investment over the next twelve months is as high as it has been at any time since August 2010. It is difficult to think of another industry, similarly exposed to political, commercial, economic and environmental pressures, which has retained the confidence of its customers and investors to the same degree.

“Ironically, it is the willingness of investors – and new investors, at that – to put their money into shipping which may lie behind the recent small dip in confidence. Private equity funding dominated the comments of respondents to an extent seldom seen in connection with any other issue during the six-year life of the survey to date. Many see the growth of private equity finance in shipping as a threat to longer-term viability. It is true that this type of funding is likely to be short-term by shipping industry standards, and shipping is an industry which best rewards long-term investors. But, in the absence of sufficient bank funding of the type which has been the traditional mainstay of shipping finance over the years, other options are required to bridge the gap.

“Shipping is a recovering market which has proved its resilience. This is bound to attract interest from new, outside investors. That will not sit well with those who believe that shipping should be financed by shipping people and their banks. But there have already been a number of recent examples of successful shipping companies being formed by private equity investors at a low point in the shipping cycle. It may be that the recent easing of asset prices will be seen by private equity as an opportunity for further investment in shipping.

“The fact is that shipping needs new investment, and that can no longer be provided solely by the banks. Those who fear the repercussions of going into business with investors who don’t know the shipping industry should seek professional financial advice before making a commitment. Private equity investors who want to know more about shipping before taking the plunge, meanwhile, should do the same.

“Elsewhere, the survey revealed some familiar areas of concern, not least in connection with overtonnaging, and the effect that the entry into the market of large numbers of newbuildings will have on freight rates. Another recurring area of concern involves the cost of achieving regulatory compliance, in particular with the ballast water management convention, and of meeting the escalating cost of daily operation. These are the bread-and-butter issues of shipping, and bread and butter is expensive in today’s industry. They are also the issues that putative private equity investors will have to factor into their decision-making.

“Some people are already calling this period in the shipping cycle the recovery that never arrived. This works well as a sound-bite, but takes no account of the improved levels of confidence we have seen recently. Shipping industry confidence today is vastly improved compared to where it was five years ago. As one of our respondents noted, it may not yet to be time to break out the champagne. But neither is it time to subsist solely on beer.”

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 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk