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


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.

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Liberia becomes first flag state to join the Maritime Anti-Corruption Network

Liberia has become the first ship registry to be admitted to the Maritime Anti-Corruption Network (MACN) as an associate member.

Alfonso Castillero, CCO of the Liberian Registry, says, “We are greatly honoured to be the first ship registry admitted as an associate member of the MACN. The organization has done great work fighting corrupt practices in some of the most difficult regions in the industry. MACN’s model of government and local partner collaboration, and industry-led collective action, is considered global best-practice. It’s not often the shipping sector gets that sort of recognition.

“Effective flag states, such as Liberia, offer a unique perspective and opportunity in the fight for a maritime industry free of corruption. Liberia’s fleet of over 4,325 vessels trades in some of the world’s most difficult regions. Our global network of full-service offices and local inspectors means that the flag is never far away. Together with MACN, we can help provide the crews of these ships with processes and procedures as well as with firm backing and support to defeat bribery attempts. This backing serves to allay fears and prevent negative recourse by unscrupulous officials seeking enrichment at the expense of shipowners.”

MACN’s Programme Director, Cecilia Müller Torbrand, welcoming the Liberian flag as an associate member, says, “As we have already shown, strength in numbers is a central part of how MACN can drive change. It is vital we look for ways to include maritime-related businesses who want to take part in this fight. Flag states are a central part of the shipping world and we look forward to the contributions Liberia will make to MACN’s future efforts.”

Benson Peretti, the Liberian flag’s MACN representative, says, “MACN has shown that the shipping sector can work together for outcomes that few would have thought possible. We look forward to being an active participant and sharing with the group findings and lessons learned to improve everyone’s ability to fight corruption. We would encourage other flag states to consider joining the network, because the more we work together the better the results will be for crew, owners, and the wider shipping community.”

The Liberian Registry is comprised of over 4,325 vessels aggregating 157 m gt, representing 11% of the world’s oceangoing fleet. Liberia has earned international respect for its dedication to flagging the world’s safest and most secure vessels. The Liberian Registry is recognized at the top of every industry White List, including those of the major Port State Control authorities. As a founding member of the International Maritime Organization (IMO), Liberia took a leading role in global shipping at a very early stage and continues to be a member of the IMO Council. www.liscr.com


The Maritime Anti-Corruption Network (MACN) is a global business network working towards the vision of a maritime industry free of corruption. Established in 2011, MACN has grown to include over 100 members globally, and has become one of the pre-eminent examples of collective action to tackle corruption. MACN and its members work towards the elimination of all forms of maritime corruption by raising awareness of the challenges faced; implementing the MACN Anti-Corruption Principles and co-developing and sharing best practices; collaborating with governments, non-governmental organizations, and civil society to identify and mitigate the root causes of corruption; and creating a culture of integrity within the maritime community.
www.maritime-acn.org/

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

London P&I Club reports increased free reserves for 2017/2018

THE London P&I Club has issued an advance summary of its result for the 2017/2018 financial year, ahead of the publication of its annual report. The club recorded an overall surplus after tax of $6.6m, increasing the free reserve to $194.6m. The combined ratio was 118.7 percent. In the year to 20 February 2018, there was an investment return on the club’s portfolio of 5.5 percent, or $18.9m, net of associated management expenses.

The club continues to receive additional entries from new as well as existing members and, following the February 2018 renewal, there was a year-on-year increase of 5.8 percent in its mutual membership. In addition, there was further volume growth in the club’s bespoke covers for charterers and for the owners of smaller vessels.

Ian Gooch, CEO of the club’s management team, says, “The continued strengthening of the free reserve was pleasing and the growth in the membership was also encouraging. At the same time, though, the 2017/2018 result reflected a $14.4m rise in the cost of the club’s net incurred claims, the drivers of which included an increase in claims activity involving the International Group Pool as well as an increase in the cost of higher-severity Fixed and Floating Object claims within the club’s retained layer. The claims outturn coincided with a period of continued pressure on P&I premium levels and the combination of these factors contributed to an increase in the combined ratio.”

www.londonpandi.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

London P&I Club guidance on reducing risk of bulk cargo liquefaction

The London P&I Club, working in co-operation with leading classification society Bureau Veritas and its casualty and salvage subsidiary TMC Marine, has produced an operational guide designed to reduce the risk of liquefaction in potentially volatile bulk cargoes such as ore fines and concentrates.

Reducing the Risk of Liquefaction is intended to provide general guidance and practical advice to masters, shipowners, shippers and charterers on the loading and carriage of bulk cargoes which may liquefy, the risks associated with liquefaction, and the precautions which should be taken to minimise those risks.

Despite an improvement in the awareness of the risks associated with the carriage of cargoes such as iron ore fines, coal, manganese ore fines and nickel ore, incidents involving liquefaction continue to occur, sometimes with catastrophic and tragic results. The main, mandatory requirements for the safe carriage of solid bulk cargoes are stipulated in the IMSBC Code, but Reducing the Risk of Liquefaction supplements this by explaining the precautions that should be taken before accepting cargoes for shipment and the procedures to be followed for their safe loading and carriage.

Carl Durow, Loss Prevention Manager at The London P&I Club, says ‘Bulk carriers represent a significant proportion of the tonnage entered in the London P&I Club, and we continue to see evidence of incidents involving cargo liquefaction, most notably involving shipments from South-East Asian ports. The club is therefore committed to providing advice which improves an understanding of how liquefaction occurs and its effect on the stability of a ship. Key decision-makers are generally to be found on board ships, and the advice in the guidance which we have produced in co-operation with BV and TMC is therefore aimed primarily at seafarers.”


www.londonpandi.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

Moore Stephens says Greek tax changes will affect shipping companies

International accountant and shipping adviser Moore Stephens says changes recently approved by the Greek parliament to the country’s tax laws will impact companies engaged in the shipping industry.

There is a new requirement for Greek shipowners to pay tonnage tax on ships operating under flags other than the Greek flag which are managed by companies based in Greece, or offshore companies which have a branch in Greece, operating under Law 89 of the Greek constitution.

Michael Kotsapas, a partner with the Moore Stephens shipping team, says, “This new requirement to pay tonnage tax, effective from 1 January, 2013, mirrors that which is already in existence for the Greek-flag merchant fleet. A large part of the Greek fleet currently sails under foreign flags, and therefore is impacted by the new tonnage tax regulations. Management companies are jointly liable with shipowning companies to pay the tax. Any foreign tonnage tax paid can be set off. Shipowning companies operating vessels under a foreign flag are exempt from any other taxes on profits derived from the operation of the vessels outside Greece, similar to exemptions available for operating Greek-flagged vessels.”

A new range of levies has also been introduced for companies providing services to the shipping sector in Greece. These changes affect shipbrokers, insurance brokers, agents, average adjusters, charterers and others, irrespective of whether they provide services to ships under Greek or foreign flag, but exclude ships trading on purely domestic routes and some passenger ships. Shipowners and ship management companies are exempt.

The new service-related charges will be imposed on remittances of foreign currency, based on the following scales: 5 per cent on remittances up to $200,000; 4 per cent on remittances between $200,001 and $400,000; and 3 per cent on remittances over $400,000. The charges are annual and will be made for a four-year period, beginning retrospectively from 2012. In addition, service company profit distributions, either as dividends or as bonuses to directors and staff, are now taxed at a flat rate of ten per cent.

Michael Kotsapas says, “Shipping remains a key industry for Greece, and an important source of foreign currency. In recognition of the need to maintain the attractiveness of Greece as a base for companies engaged in the shipping industry, these service-related charges have very recently been reduced to 50 per cent of the figures included in the original legislation.”

  

Moore Stephens was the first international accounting firm to open an office in Greece. This year, it celebrates the 50^th anniversary of its dedicated presence in the country. 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 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion. www.moorestephens.co.uk

For more information:                                                                     

Michael Kotsapas                                                                   

Moore Stephens LLP                                                                         

Tel: +44 (0)20 7334 9191                                                      

michael.kotsapas@moorestephens.com                                   

Shipbroker pays the price for failure to put it in writing

International Transport Intermediaries Club (ITIC) has emphasised the potentially costly consequences of a failure on the part of shipping intermediaries to confirm in writing any initiatives performed on behalf of their principals.

In the latest issue of its Claims Review, ITIC says it has seen an increasing number of claims on its shipbroking members relating to the receipt and forwarding of messages. Emphasising the importance of accurate record-keeping and the need to reconfirm telephone conversations in writing, it reports how the failure of a shipbroker to provide written confirmation of the appointment of an arbitrator in a dispute between its principal, a charterer, and a shipowner, exposed the broker to a claim and costs in excess of $200,000 at a court-ordered mediation in the United States.

The shipbroker found itself in the middle of a dispute between the owners and charterers involving a demurrage claim in excess of $400,000. The charterers failed to settle and the owners initiated arbitration in London. As the charterers failed to nominate their arbitrator, the owners nominated a sole arbitrator. Despite orders from the sole arbitrator to serve defence submissions, no communication was received from the charterers. The arbitrator subsequently awarded owners the full amount of the demurrage claim plus interest and costs - a total of $575,000.

The owners tried to collect the award against the charterers through the US courts. The charterer’s defence was that they had never been advised of the arbitration proceedings and therefore had not had an opportunity to appoint an arbitrator. The charterers also alleged that the shipbroker had failed to inform them about the arbitration, and brought the broker into the US action.

The broker confirmed that it had advised the charterer by telephone about the appointment of an arbitrator, and again when arbitration proceedings had started. But it had failed to confirm this by email and the charterer, well aware of the lack of written confirmation, simply denied that such telephone conversations had taken place.

ITIC notes that, if the court had found the broker to be an ‘agent’ of the charterer, it could have been argued that the service of notices regarding arbitration proceedings on the broker could be deemed to be service on the charterers, with the result that the arbitration award was enforceable against the charterers, who in turn may have pursued the broker for the full value of the award.

The case was concluded at a court-ordered mediation by means of a payment to the owners of $450,000. The broker contributed $75,000 to the settlement, and the legal costs of defending the broker were in excess of $140,000 – a total of $215,000.

“This was a high price to pay,” says ITIC, “for a simple failure to follow up a telephone conversation with an emailed confirmation.”

Copies of the ITIC Claims Review can be requested from: chris@merlinco.com

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com.

For more information:                             

Charlotte Kirk                                              

ITIC                                                                

Tel. +44 (0)20 7338 0150                          

Fax. +44 (0)20 7338 0151                         

charlotte.kirk@thomasmiller.com