Shipping confidence hits 18-month high

Confidence in the shipping industry rose in the last quarter to its highest level for 18 months, according to the latest Shipping Confidence Survey from leading shipping adviser and accountant BDO.

The average confidence level expressed by respondents to the survey was 6.4 out of 10.0, compared to 5.8 Q3 2019. This is the highest rating since the same level of confidence was recorded in May 2018, and it is necessary to go back to February 2014 in order to see confidence at a higher level.

Confidence on the part of both managers and owners was up to 6.9 out of 10.0 from the levels recorded in the previous survey of 5.9 and 6.4 respectively. But confidence in the broking sector was down from 5.1 to 3.9, the lowest rating for this category of respondent since the survey was launched in May 2008. Confidence was down in Asia from 6.8 to 6.0 but up in Europe and in North America from 5.7 to 6.2 and from 4.3 to 6.8 respectively.

The likelihood of respondents making a major investment or significant development over the coming year was unchanged from last time at 5.5 out of 10.0. Owners’ confidence was down from 6.5 to 6.3, while that of brokers dropped from 4.4 to 2.9. Meanwhile the expectations of managers held steady at 6.1. Expectations were down in Asia and in Europe, from 6.6 to 5.7 and from 5.4 to 5.1 respectively.

The number of respondents expecting finance costs to increase over the coming year was up from 25% to 37%. Whereas 57% of managers (up from 20% last time) anticipated dearer finance over the next 12 months, just 32% of owners (albeit up from 27% last time) thought likewise.

In the freight markets, the number of respondents anticipating higher tanker rates over the coming year was up from 43% to 46%, with little or no movement in the expectations of main respondent categories compared to the previous survey. In the dry bulk sector, overall expectations of rate increases were up from 39% to 50%, and in the case of brokers alone from 20% to 71%. The numbers expecting higher container ship rates, meanwhile, rose by 10 percentage points to 29%. Net rate sentiment was positive in all three main tonnage categories.

In a stand-alone question, respondents were asked to estimate where the US Federal Reserve’s Federal Funds Rate would stand in 12 months’ time. 24% of respondents put the figure at 1.50%, while estimates of 1.75% and 1.25% were favoured by 17% and 16% of respondents respectively. 15% of respondents predicted that the rate would reach 2.00%, while 11% predicted a figure of 2.25%. Overall, 16% of respondents put the likely rate at no higher than 1.00%.

Richard Greiner, Partner, Shipping & Transport at BDO, says, “It is not far short of six years since confidence in the industry has been higher, and appetite for investment remains steady despite volatile economic conditions. This is despite general ongoing geopolitical uncertainty, and notwithstanding specific concerns about a variety of issues including Brexit and President Trump’s impeachment inquiry.

“Shipping is not for the faint-hearted, and committed long-term players remain the most likely to achieve the best returns. Our latest survey revealed an increased expectation over the next 12 months of dearer finance costs. Such costs remain one of the most significant performance-influencing factors for our respondents. But the cost of regulatory compliance is slowly gaining in importance, and will continue to do so. IMO 2020 was recently categorised by one commentator as a ‘perfect storm’ for litigators. It is also part of a much larger commitment by the shipping industry to enhancing its green credentials, and in the process becoming a more technologically advanced and environmentally responsible sector. As such, it should be eminently attractive to investors.”

Note to editors
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


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Confidence slips marginally on geopolitical fears

Shipping confidence dipped very slightly in the three months to end-August 2018, according to the latest Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was down to 6.3 out of a maximum possible score of 10.0, this compared to the four-year-high of 6.4 recorded in May 2018. Confidence on the part of owners, however, was up from 6.6 to 6.8, equalling the highest level achieved by this category of respondent when the survey was launched in May 2008, with an overall rating for all respondents of 6.8 out of 10.0.

Confidence on the part of charterers was also up, from 6.7 to 7.0, the highest level for nine months. The rating for managers, however, was down from 6.7 to 6.2, and for brokers from 6.3 to 4.9. Confidence in Asia was up from 6.1 to 6.3, equalling the highest rating achieved over the past 12 months.


The likelihood of respondents making a major investment or significant development over the next 12 months was up from 5.2 to 5.5 out of 10.0. Owners’ confidence was up from 5.5 to 6.5, but charterers recorded a drop from 6.7 to 4.0. Expectations of major investments were up in both Asia (from 5.9 to 6.1) and Europe (from 4.8 to 5.3).

The number of respondents who expected finance costs to increase over the coming year was down to 59% from 63% last time. Owners (up from 64% to 70%) and charterers (up from 33% to 50%) expected such costs to increase, but managers (down from 65% to 45%) and brokers (down from 75% to 71%) were of the opposite opinion.

The number of respondents expecting higher rates over the next 12 months in the tanker trades was up by 3 percentage points to 53%. In the dry bulk sector, there was a 16 percentage-point fall, to 38%, in the numbers anticipating higher rates, while the numbers expecting higher container ship rates fell from 43% to 26%. Net sentiment in the tanker sector was +44, in the dry bulk trades +27, and for container ships +3.

Demands trends were identified by 28% of respondents as the factor likely to influence performance most significantly over the coming 12 months. Competition (23%) was in second place, followed by finance costs (17%).

In a stand-alone question, 44% of respondents said they expected tariff wars to have “some” impact on the industry over the next 12 months. Meanwhile, 42% categorised such impact as “considerable,” and 11% felt that it would be “minimal”.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “A small dip in confidence is not the news the industry wanted to hear, but confidence remains at its second-highest level for four-and-half years. Moreover, it is significant that the confidence of both owners and charterers actually increased.

“Concerns about geopolitical factors dominated the comments from respondents. These were led by President Trump’s efforts to transform US trade relations, but also included state support for shipping in China and South Korea. Shipping will always stand to reap the benefits of its global identity and presence, but will also court the risks that this must inevitably embrace.

“Fortunately, shipping is accustomed to playing on the big stage, against a volatile backdrop and to a demanding audience. The Baltic Dry Index is up on a year ago and oil prices are on the rise. These and other positive portents encourage the belief that shipping is starting to recover, albeit slowly, from a ten-year downturn.”


Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 614 offices of independent member firms in 112 countries, employing 30,168 people and generating revenues in 2017 of $2.9 billion. www.moorestephens.co.uk/shipping-transport


For more information:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Moore Stephens identifies weak spots in shipping risk management

Confidence in the ability of sound risk management to contribute to commercial success in the shipping industry has fallen in the last 12 months, according to the latest annual Shipping Risk Survey from leading accountant and shipping adviser Moore Stephens.

Respondents to the survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 5.9 out of a possible score of 10.0, compared to 6.8 in the 2017 survey.

Brokers returned the highest rating, followed by ship managers. For the first time in the four-year life of the survey, Europe was behind Asia in terms of geographical sentiment, but it was the Middle East which once again returned the highest figure (6.8).

Overall, respondents rated the extent to which enterprise and business risk was being managed effectively by their organisations at 7.3 out of 10.0, up from the rating of 7.1 recorded last time to the highest figure in the life of the survey. Charterers expressed the highest level of confidence in this regard.

Demand trends was cited by 17% of respondents (up from 16% in the previous survey) as the factor likely to pose the highest level of risk to their organisation. The cost and availability of finance (up from 13% to 16%) featured in second place, followed by competition, down from 14% to 13%. Operating costs were ranked in fourth place at 9% compared to 10% last year. There were also significant increases for bunker and fuel costs (up from 4% to 7%) and geopolitics (up from 4% to 6%). Meanwhile, supply of crew declined from 6% to 3%.

Geographically, demand trends remained the number one concern in Europe, Asia and the Middle East.

Respondents to the survey felt that the level of risk posed by most of the factors which impacted their business would remain steady over the next 12 months, with the exception of demand trends, fuel emissions, bunker and fuel costs and geopolitics, which were all perceived to have the potential for increased risk.

Overall, 73% of respondents (compared to 69% last time) felt that the senior managers in their organisations had a high degree of involvement in enterprise and business risk management. Meanwhile, 16% said that senior management’s involvement was limited to ‘periodic interest if risks materialise’, while 10% said that senior management ‘acknowledged but had a limited involvement in’ enterprise / risk management.

Overall, 36% of respondents (compared to 30% in the previous survey) confirmed that enterprise and business risk was managed by means of discussion without formal documentation, while 48% noted that risk was documented by the use of spreadsheets or written reports, compared to 45% previously. Third-party software was employed by 4% of respondents (14% last time) to manage and document risk, while 7% used internally developed software, as opposed to 10% at the time of the previous survey.

On a scale of 1.0 (low) to 10.0 (high), changes to legislation were deemed the factor most likely to result in a material misstatement in companies’ period-end financial statements. Next came estimates of claims and provisions, vessel impairment, disclosure of commitments and contingencies, and loan covenant non-compliance.

Michael Simms, Moore Stephens partner, Shipping Industry Group, says: “Shipping is a high-risk industry, and one where inattention to the proper identification and management of risk can have catastrophic consequences. It is not possible to take the risk out of shipping. But it is possible to reduce the levels of risk by identifying potential hazards and then putting in place measures to eliminate or reduce them.

“Traditionally, this has not been something at which shipping has excelled. Too often in the industry, the risk has outweighed the reward. But there has never been a more pressing need for shipping to address the way in which it analyses and manages risk.

“The nature of risk itself is changing, not least with the insidious increase in levels of cyber-crime. And the need to manage risk effectively is the subject of increasing legislation, notably in the form of the UK Corporate Governance Code and more stringent requirements in other jurisdictions.

“Our survey reveals that shipping is responding on some levels to existing and new challenges relating to the management of risk, but falling short in others. The disappointing news is that the respondents to our survey emerged as significantly less satisfied than they were 12 months ago that sound enterprise and business risk management was contributing to commercial success.

“On the plus side, almost three-quarters of respondents reported that their senior managers had a high level of involvement in risk management. There was a small increase in the number of respondents who noted that risk was managed by the use of proper written documentation, accompanied by an increase in the level of undocumented risk management discussions. But there was a 10% drop in the use of third-party software, and a smaller decline in the use of software developed internally.

“The findings of the survey suggest that shipping still has some way to go in order to significantly improve its risk management profile. This is particularly relevant if, as seems likely, we are beginning to see the start of a recovery in the industry’s fortunes after a ten-year slump. New opportunities will bring more – and some new – risks, and these will need careful management.

“Respondents to our survey deemed demand trends to be the biggest risk they face. They also identified fuel emissions, bunker and fuel costs, and geopolitics as posing an increased risk to their businesses over the next 12 months.

“There are sound reasons to explain why respondents should identify the potential risks to business posed by these classic elements of shipping practice. But it is open to question whether it is entirely prudent to classify certain other risks as merely ‘steady’, including the risk posed by the likes of cyber security, which is an increasing threat in shipping, as are changes to corporation tax and transfer pricing legislation around the world.

“This is not the time for shipping to be taking its eye off the risk ball. The tone at the top is everything, the starting point for good practice and transparent management which can improve the confidence of investors and other stakeholders. Shipping businesses which fail to recognise and address their genuine level of exposure to threat are at great risk of both financial and reputational damage.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 614 offices of independent member firms in 112 countries, employing 30,168 people and generating revenues in 2017 of $2.9 billion. www.moorestephens.co.uk/shipping-transport


For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.simms@moorestephens.com">michael.simms@moorestephens.com

Shipping confidence at highest level for three-and-a-half years

Shipping confidence held steady at its highest rating in the past three-and-a-half years in the three months to end-November 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was unchanged at the level of 6.2 out of 10.0 recorded in the previous survey in August 2017. Confidence on the part of charterers was significantly up, from 4.7 to 7.7, the highest rating recorded for this category of respondent since the survey was launched in May 2008 with an overall rating of 6.8. Managers (up from 5.8 to 6.1) were also more optimistic, while brokers’ confidence was unchanged at 6.3. The rating for owners, however, fell from 6.5 to 6.4. Confidence levels were down in Asia, from 6.4 to 5.7, and unchanged in Europe and North America, at 6.3 and 5.8 respectively.

The likelihood of respondents making a major investment or significant development over the next 12 months was down from 5.4 to 5.3 out of 10.0. Charterers’ confidence, however, was up from 4.0 to 6.2. Expectations on the part of owners and brokers were up from 5.8 to 5.9 and from 4.4 to 5.3 respectively, but down from 5.4 to 5.3 for managers. Asian respondents (down from 5.9 to 5.0) were less confident in this regard, but in North America the rating was up from 4.9 to 5.4. In Europe, expectations held steady at 5.2.

Although overall expectations of making major investments over the next 12 months were marginally down on the three-year high recorded in the previous survey, several respondents saw encouraging signs of recovery, and potential for further improvement, particularly in the dry bulk sector. One respondent said: “Undeniably, things are a little better, but there is not such a significant improvement that we can break out the champagne and celebrate a recovery.”

59% of respondents expected finance costs to increase over the coming year, up from 50% last time to equal the highest figure since October 2008. Owners’ expectations were up from 48% to 54%, while the increase for charterers was from 67% to 83%, and for brokers from 42% to 60%. Managers, meanwhile, recorded a fall from 62% to 61%.

Despite a fall from 27% to 23%, demand trends continued to be the factor expected to influence performance most significantly over the coming 12 months followed by competition and finance costs. One respondent said: “Shipping continues to be volatile and unstable, with an oversupply of tonnage, and new finance continuing to pour in, while geopolitical issues and new regulations are causing disruption.”

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was down by 1% on the previous survey to 44%, while there was a one percentage-point fall, to 13%, in those anticipating lower rates. There was a six percentage-point fall, to 50%, in the numbers expecting higher rates in the dry bulk sector, and a five percentage-point increase to 12% in the numbers anticipating lower rates. In the container ship sector, the numbers expecting higher rates dropped by four percentage points to 36%, while there was a two percentage-point fall, to 15%, in those anticipating lower container ship rates.

Net sentiment was positive in all the main tonnage categories. It was unchanged in the tanker market at +31, but down in the dry bulk market from +49 to +38, and in the container ship sector from +23 to +21.

In a stand-alone question, respondents were asked to estimate where the US Federal Reserve’s Federal Funds Rate would stand in 12 months’ time. 35% put the figure at 1.50%, with 24% opting for 1.75%. While 6% of respondents thought the figure would be 2.00%, 19% opted for 1.25%. Levels of 1.00% and less than 1.00% were each cited by 8% of all respondents, just 1% of whom expected the rate to be more than 2.00%. One respondent said: “Increased economic uncertainty, relations with North Korea, and Iran trade restrictions are among the factors which will increase the risk level in the market and lead to higher interest rates.” Another simply said: “Rates will continue to rise until there is a market correction.”

Richard Greiner, Moore Stephens partner, Shipping & Transport, says, “Confidence is at its highest level for three-and-a-half years, testament to the industry’s remarkable durability.

“Charterers are leading the way in terms of improved confidence and appetite for new investment. There is optimism in the dry bulk trades, and evidence of continuing improved confidence in the gas sector. The Baltic Dry Index, meanwhile, has risen by over 50% in the past six months, and net sentiment in all three main tonnage categories remains positive.

“Not all our respondents were upbeat and uncertainty persists, for example, over how and when to comply with the Ballast Water Management Convention and the true extent of cyber-crime. But the portents, overall, are encouraging.

“A slowdown in newbuilding activity has started to redress the imbalance in supply and demand, and that should be reflected in improved freight rates. There is an appetite for investment, and finance is available. The shipping recovery might not yet be fully under way, but 2017 may come to be regarded as the year when the downward spiral was halted.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. 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:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Shipping confidence hits three-year high

Shipping confidence reached its equal highest rating in the past three years in the three months to end-May 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents to the survey was up to 6.1 out of 10.0 from the 5.6 recorded in the previous survey in February 2017. Increased confidence was recorded by all main categories of respondent to the survey, which launched in May 2008 with an overall confidence rating of 6.8.

In the case of brokers, the confidence rating rose from 4.6 to 6.4, while for owners the increase was from 5.6 to 6.1. Confidence on the part of charterers and managers, meanwhile, was up from 5.9 to 6.4, and from 6.0 to 6.2 respectively. Confidence levels were unchanged in Asia at 5.6, but up in Europe, from 5.5 to 6.2, and in North America, from 6.1 to 6.4.

A number of respondents expressed cautious optimism about the industry’s fortunes over the next 12 months, based largely on perceived increased levels of ship demolition and a rationalisation of over-ambitious newbuilding plans. This helped increase expectations of major investments being made over the next 12 months. Concern persisted, however, over political uncertainty, overtonnaging in certain trades, depressed oil prices and a potential dearth of quality seafarers.

One respondent said, “Shipping people are eternally optimistic, with one week of good news seeming to help them forget eight terrible years of hardship and financial loss.”

The likelihood of respondents making a major investment or significant development over the next 12 months was up from 4.9 out of 10.0 in the previous survey to 5.4, the highest level since August 2014. There was increased confidence on the part of all major respondents, in the case of charterers up to a level of 6.3 from 5.8 in February 2017. Owners and managers, meanwhile, each registered a confidence level of 5.9, up from 5.1 and 5.6 respectively last time. Confidence on the part of brokers was up from 3.4 to 4.4.

50% of respondents expected finance costs to increase over the coming year, compared to 54% in the previous survey. Owners’ expectations fell from 57% to 48%, while managers were also down, from 61% to 57%. More brokers and charterers, however, anticipated costlier finance – 63% of brokers (against 41% last time) and 57% of charterers (compared to 47% in February 2017). “The financial support needed to boost the markets is not yet at expected levels,” noted one respondent, “but we believe that the situation will improve in the coming months as demand increases.”

Demand trends, cited by 26% of respondents, continued to be the factor expected to influence performance most significantly over the next 12 months, followed by competition (22%) and finance costs (14%). According to one respondent, “Larger companies are targeting their smaller competitors in order to minimise competition and secure a stronger position in the market.”

The number of respondents expecting higher freight rates over the next 12 months was up on the previous survey in all three main tonnage categories. In the tanker market, 32% of respondents anticipated improved rates, as opposed to 25% last time, while the number anticipating lower tanker rates fell from 28% to 16%. Meanwhile, there was a 14 percentage-point rise, to 58%, in the numbers anticipating higher rates in the dry bulk sector, the highest figure for three years.

In the container ship sector, the numbers expecting higher rates rose from 31% to 46%, while there was a six percentage-point fall, to 12%, in those anticipating lower container ship rates. Net sentiment was up in the tanker market from -3 in February 2017 to +16 this time, while the increases in the dry bulk and container ship trades respectively were from +33 to +50 and from +13 to +34.

In a stand-alone question, respondents were asked to estimate the level they expected the Baltic Dry Index (BDI) to be at in 12 months’ time. More than half (52%) felt the BDI would reach a level of between 1000 and 1499, while a quarter (25%) put the likely figure at between 1500 and 1999. “Healthy volumes of cargo are being moved,” said one respondent, “but there are too many ships around.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “The survey was launched in 2008, on the very cusp of one of the most protracted and severe global economic downturns, with a confidence rating of 6.8. In our latest survey, the figure stands at 6.1 which, given geopolitical, economic and industry developments, must be seen as a robust rating. Moreover, confidence today of making a major new investment is the highest it has been for almost three years. The positive sentiment on freight rates is welcome, although this must be weighed against the lows to which they have fallen and from which they must continue to recover.

“Even for an industry which is familiar with the volatile nature of international commerce, shipping’s ability to survive adversity is worthy of comment. Our latest survey found many of our respondents in watchful mode, mindful of the fact that there are still too many ships, but encouraged to believe that increased demolition and more pragmatism by industry stakeholders will help to redress this imbalance. Respondents also remain cognisant of the impact which geopolitical developments can have on shipping, and it will be instructive to see what effect all this will have on industry confidence in our next quarterly survey.”

The full survey report can be downloaded from the Moore Stephens website:
http://www.moorestephens.co.uk/news-views/june-2017/confidence-hits-three-year-high

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. 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:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Liberian Registry strengthens Asia team to meet growing demand

The Liberian Registry has announced strategic new appointments in a number of key areas within the Asian regional offices operated by its US-based manager, the Liberian International Ship & Corporate Registry (LISCR).

Ms. Wan Ching Chiang has been promoted to Registrations Manager for the Liberian Registry in Singapore. Ms. Chiang is embarking on her fifth year with the Liberian Registry, which she joined as Registrations and Corporate Co-ordinator. In her new role, Ms. Chiang will be overseeing vessel mortgage and corporate registrations for the Liberian Registry’s fast- growing number of South-East Asian clients. Ms. Chiang graduated with a Bachelor of Science degree in Business Administration and has previous experience with working in the financial industry with both HSBC and Barclays Capital.

The Liberian Registry’s Greater China team has been bolstered by the additions of Mr. Pao Chi Hsu and Mr. Owen Fu as Technical Managers. Mr. Hsu, who holds a Master’s Degree in Ocean Engineering, has previously worked as a lead class surveyor in the Greater China region and as a vessel superintendent for a leading bulk carrier owner. Mr. Fu is taking on this new challenge following a successful career as a leading port state control officer and department head for China’s Maritime and Safety Administration in the port of Ningbo. Mr. Fu obtained his Master’s Degree in Naval Architecture from Shanghai Jiaotong University, and his Ph.D. in Engineering from Shanghai Maritime University. Mr. Hsu’s and Mr. Fu’s expertise with vessel compliance, audits and port state support has played a critical role in significantly reducing the number of detentions of Liberian-flagged vessels in the Tokyo MoU region.

LISCR CEO Scott Bergeron says, “The Liberian Registry has experienced tremendous growth in Asia over a number of years. Most recently, that growth has accelerated following the historic Agreement on Maritime Transport between the People’s Republic of China (PRC) and the Republic of Liberia, under which Liberian-flag vessels will be charged a preferential rate for tonnage dues when visiting any port in China.

“The Liberian Registry is committed to expanding its network of professionals to meet increasing demand, providing expertise and advice when and where it is needed, and adding to our core strength of offering timely, informed and innovative service to our continually expanding client base.

“Asia is a vibrant and vital hub in the worldwide shipping chain, and increasing numbers of owners from the region are putting their trust – and their ships – in the Liberian Registry. These recent executive appointments confirm our commitment to providing the best service available to shipowners, operators and managers anywhere in the market today.”

The Liberian Registry has long been considered the world’s most technologically advanced maritime administration. It has a long-established track record of combining the highest standards of safety for vessels and crews with the highest levels of responsive service to owners. Moreover, it has a well-deserved reputation for supporting international legislation designed to maintain and improve the safety and effectiveness of the shipping industry and protection of the marine environment.

www.liscr.com

Charterers remain optimistic despite small downturn in shipping confidence

Overall confidence levels in the shipping industry fell slightly during the three months to August 2014, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. They are, however, still higher than at the corresponding period twelve months ago, and confidence among charterers actually reached a six-year high. The amount of anticipated significant new investment over the next twelve months was down over the three-month period, as were levels of expectation with regard to improved freight rates in the dry bulk and container ship sectors. Once again, the dominating concern among respondents was the perceived adverse effect on the market of an excessive amount of tonnage.

In August 2014, 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), down from the 6.3 recorded in May 2014. This compares to the 5.9 recorded in August 2013, and to the record high of 6.8 when the survey was launched in May 2008.

Charterers expressed a significant increase in confidence this time, up from 6.1 to 6.7, the highest figure recorded by this category of respondent in the life of the survey. Owners (up from 6.1 to 6.2) were also more confident. But confidence on the part of managers and brokers was down, from 6.5 to 6.2 and from 6.0 to 5.3, respectively. The biggest fall in confidence was in fact that expressed by uncategorised respondents (down from 6.7 to 5.9).

Geographically, confidence was down in all main areas canvassed by the survey. In Asia, the fall was from 6.4 to 6.0, in Europe from 6.2 to 6.1, and in North America from 6.5 to 6.2.

A number of respondents referred to the adverse effect which political and economic developments are having on the market. “The economic outlook is poor globally,” said one, while another emphasised, “The shipping markets are still unpredictable, and much will depend on political and economic developments between certain nations and on the easing or intensifying of economic embargoes.” Elsewhere it was noted, “Political risks have increased, and this will adversely impact the market.” Not everybody agreed, however, with one respondent noting, “Confidence is positive, with US economic growth positive and the global economy on a path to recovery, easing capital flow into the market.”

“We had been anticipating a better year in 2014,” said one respondent, “but that has not materialised to date, so we now look to 2015, when we anticipate a better year, with an improvement between supply and demand in terms of tonnage.” This was a sentiment shared by another respondent, who noted, “The supply/demand balance will come back into owners’ favour in 2015, when we will see a stronger market.”

Others, meanwhile, were less optimistic. “There is no economic basis for substantial growth,” said one, while another observed, “The market is stuck at a level characterised by low income and low expenditure, which now seems to be the norm, despite expectations of a speedy recovery following the recession.” Still another warned, “We have seen a very prolonged period of poor freight rates and, unless we witness a real improvement in the next few months, some owners – especially those who bought expensive ships – will be in trouble.”

Despite evidence to suggest that measures to reduce overtonnaging in the industry are meeting with some success, a number of respondents warned that there were still too many ships – both in service and on order – for the cargoes available. “Everything depends on the need to restrict ordering,” said one, while another noted, “The market is in danger of collapse as a result of newbuilding speculation based on misleading projections. The market will return to health once non-shipowning operators and cash-strapped owners exit the industry.”

“Overtonnaging in the tanker and bulk carrier markets continues to have an adverse effect on freight rates,” complained one respondent, while in similar vein another noted, “The most important thing is to stop building new ships, especially tankers and bulkers.”

One respondent felt that the current market represented “a period of relative calm before the next wave of eco-design newbuildings starts hitting the water, at which point we can expect a return to choppy conditions.” And another still saw reasons for optimism, noting, “Although shipowners still order new vessels in an already oversupplied market, the cash surplus from the last boom is running out and decisions are being taken with greater care and thought, and are usually tied in to specific new projects and requirements. This is likely to slow down deliveries, while scrapping also remains attractive for older and less efficient tonnage.”

The likelihood of respondents making a major investment or significant development over the next twelve months was down on the previous survey, on a scale of 1 to 10, from 5.8 to 5.4, the lowest figure recorded in this respect since November 2012. The figures for all categories of respondent were down, most notably in the case of charterers, who rated the prospect of new investment at just 5.5, as opposed to 6.4 three months ago. Managers’ expectations, meanwhile, were down from 6.2 to 5.6, while owners recorded a drop from 5.8 to 5.6.

Just 21 percent of charterers (down from 68 percent last time) rated the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0 or higher. Meanwhile, 41 percent of owners and 38 percent of managers were of like mind, compared to 43 percent and 56 percent respectively last time.

Geographically, expectation levels of major investments were down in Asia, from 5.9 to 5.2 (the lowest figure since May 2012), in Europe, from 5.7 to 5.4, and from 5.9 to 5.6 in North America, where just 22 percent of respondents rated the likelihood of making a new investment over the next twelve months at 7.0 out of 10.0 or higher, as opposed to 62 percent in the previous survey.

One respondent said, “There is too much speculative money coming into the market at present, which will lead to an over-supply in due course.” Another observed, “The current problems in shipping have been caused in part by shipowners making speculative investments in new ships.”

Demand trends, competition and finance costs, in that order, 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 competition were unchanged from last time at 23 percent and 20 percent respectively, while the number of respondents citing finance costs fell from 15 percent to 14 percent this time. Tonnage supply (up one percentage point to 14 percent) featured in equal third place, while operating costs (unchanged at 10 percent) and fuel costs (down one percentage point to 9 percent) featured in fifth and sixth places respectively.

Demand trends, although down 4 percentage points to 23 percent, remained the number one performance-affecting factor for owners. Tonnage supply (up one percentage point) and competition (up 3 percentage points) featured in equal second place, on 18 percent. For managers, meanwhile, competition (unchanged at 21 percent) remained in first place, followed by finance costs (up 2 percentage points to 17 percent) and demand trends (up one percentage point to 15 percent). For charterers, demand trends, although down 5 percentage points to 25 percent, remained in first place, ahead of competition (down from 21 percent to 16 percent) and tonnage supply (15 percent).

Geographically, demand trends were the most significant factor for respondents in Europe (unchanged at 24 percent) and North America (up 7 percentage points to 28 percent), but in Asia it was competition (up 2 percentage points to 21 percent) which topped the list, ahead of demand trends (down from 22 percent to 20 percent). Competition was the second most significant performance-affecting factor in Europe (unchanged at 19 percent) and in North America (up 3 percentage points to 20 percent). In both Europe and Asia, tonnage supply featured in third position, with 15 percent, while in North America it was finance costs (down by one percentage point to 15 percent) which occupied third place.

One respondent noted, “Operating and crew costs are the biggest challenge,” while another warned, “New regulations such as the sulphur rules which incept on 1 January 2015 will cause significant problems for many owners. The available techniques are very expensive and, in many cases, not possible to install on ships.”

The number of respondents overall who expected finance costs to increase over the next twelve months was down by 2 percentage points to 39 percent, the lowest figure since May 2013. All main categories of respondent recorded a fall in numbers in this regard, in the case of charterers by 19 percentage points to 29 percent. The number of owners expecting finance costs to rise was down by 3 percentage points to 39 percent, while for managers and brokers the figures were 36 percent (down 3 percentage points) and 44 percent (down 6 percentage points) respectively.

The number of respondents in Asia anticipating an increase in the cost of finance was down by 9 percentage points to 45 percent, while in both Europe and North America the numbers were up - from 34 percent to 35 percent, and from 62 percent to 67 percent respectively.

“Finance is still difficult for companies which have limited equity,” said one respondent, “so the future looks pretty uncertain in the absence of really strong global economic growth.” Another maintained, “The banks should support the industry, otherwise there is a danger that smaller players will be badly affected, or eliminated from the industry altogether, by big shipping lines and tonnage alliances.” Elsewhere it was noted, “The lack of finance/credit is crippling the shipping industry.”

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

The number of respondents overall expecting higher rates in the tanker sector over the next twelve months was unchanged at 41 percent, the second-highest figure since May 2011. Managers (down 3 percentage points to 43 percent) were the only category of respondent to record a fall in numbers anticipating higher rates. Charterers recorded a 17 percent increase, to 38 percent, in levels of expectation of improved tanker rates, while the numbers were also up for owners (from 37 percent to 41 percent) and for brokers (by 10 percentage points to 58 percent).

Geographically, the prospects for increased tanker rates were deemed significantly lower this time in North America (down by 21 percentage points to 29 percent), one percentage point higher in Europe at 42 percent, and unchanged in Asia at 40 percent.

One respondent said, “We expect the market for large tankers to improve, but anticipate little movement in the product tanker sector.”

In the dry bulk sector, meanwhile, there was a 6 percentage-point fall, to 47 percent, in the overall numbers of those anticipating rate increases. Charterers were the only category of respondent to record an increased expectation (from 42 percent to 64 percent) that rates would increase over the coming year. The numbers for owners were down (from 57 percent to 55 percent), as were those for managers (from 45 percent to 43 percent) and brokers (from 59 percent to 43 percent). Expectations of higher dry bulk rates over the next twelve months were up in Asia from 49 percent to 55 percent, but down in Europe from 55 percent to 47 percent, and in North America, by 50 percent to 14 percent.

One respondent said, “The dry bulk market is characterised by weakening growth in demand and continued excessive fleet growth.” Another observed, “We expect any increase in dry bulk rates to be of modest proportions.”

In the container ship market, meanwhile, the number of respondents expecting rates to increase over the coming twelve months was down by 3 percentage points to 31 percent. All main categories of respondent, with the exception of owners, were less confident of rate increases this time than they were three months ago. Expectations on the part of owners were up by 6 percentage points to 42 percent, but charterers (down 6 percentage points to 40 percent), managers (down from 35 percent to 18 percent), and brokers (16 percentage points lower at 25 percent) were of a different mind. Geographically, expectations of improved container ship rates were down in Asia, from 38 percent to 32 percent, but up by 2 percentage points in Europe to 34 percent.

Moore Stephens shipping partner, Richard Greiner, says, “The slight decrease in confidence recorded over the three-month period covered by the survey coincides with a deterioration in the political situation in areas of the Middle East and Ukraine. Shipping operates on a global stage, and must inevitably be affected by international events.

“However, the responses to our survey confirm that other factors have also helped to undermine confidence. Chief among these, not for the first time, is concern about overtonnaging. There are too many ships to carry the cargoes currently available in certain trades, despite recent efforts to improve the imbalance. As a result, the freight markets are not producing the returns that the industry is looking for. But this must be seen as work in progress. The industry is still recovering from the effects of a prolonged period of global economic downturn.

“Operating costs and the bill for achieving regulatory compliance are also a continuing cause for concern, and they are costs which owners and operators must factor into their sums. As one respondent noted, if you think the cost of achieving safety is high, try having an accident. These are also costs of which the new comparatively short-term, non-shipping money which continues to come into the industry will need to be aware.

“Overall, confidence in shipping is higher than it was twelve months ago. It continues to attract investors both from within and outside the industry. Moreover, both charterers and owners, the prime movers who make the industry go round, are more confident now than they were in the previous survey. The peaks reached by the freight markets in the mid-2000s may not be achievable for the foreseeable future, but today’s industry has moved out of foothill territory and has reason to be looking up, rather than down.”

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


For more information:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com