Vessel operating costs expected to rise in 2019 and 2020

International accountant and shipping adviser BDO says total operating costs in the shipping industry are expected to rise by 2.5% in 2019 and by 2.7% in 2020.

Responses to the firm’s latest annual Future Operating Costs Survey revealed that insurance is the cost category likely to increase most significantly in both 2019 and 2020. In the case of protection and indemnity insurance, the predicted increase is 2.0% for each of the years under review, while hull and machinery insurance costs are expected to rise by 1.9% in both 2019 and 2020.

The cost of both dry docking and of repairs and maintenance is expected to increase by 1.8% in 2019 and by 1.9% in 2020, while expenditure on crew wages is predicted to rise by 1.9% in 2019 and by 1.8% in 2020. Other crew costs are expected to increase by 1.8% and 1.7% respectively.

The increase in expenditure for spares is expected to be 1.6% in 2019 and 1.8% in 2020. Meanwhile, projected increases in lubricants are 1.6% in each of the two years under review, while those for stores ae 1.3% and 1.4% respectively.

The predicted overall cost increases for 2019 were highest in the container ship sector, where they averaged 3.7%. These are heavily influenced by expected increases in both protection and indemnity and hull and machinery insurance costs. Predicted cost increases in the bulk carrier market in 2019, meanwhile, were 2.3%, as opposed to 2.5% in the tanker market and 2.6% in the offshore sector.

A slightly different pictured emerges in respect of 2020, where the highest operating cost increases are those amounting to 3.8% which are expected in the offshore sector. Operating costs for container ships, meanwhile, are expected to rise by 3.0% in 2020, and for bulk carriers and tankers by 2.7% and 2.1% respectively.

The cost of regulatory compliance was high on the list of concerns cited by respondents to the survey. One respondent said 2020 is “all about environmental regulations and the demand for - and cost of – fuel.” Elsewhere it was noted, the shipping market “will be dominated by the cost of new regulations, not least that relating to compliance with the IMO Sulphur 2020 regulation”.

Crew costs were the other factor uppermost in the minds of respondents. “Manning will continue to be a painful area for ship operators,” said one commentator. Another respondent observed that rising wage costs now represent a real threat to business models, while another anticipates a stronger dollar in 2019/2020, which will affect the main cost of paying seafarer wages.

The cost and availability of finance was another issue raised by a number of respondents, one of whom said, “finance – or a lack thereof – is driving consolidation as part of a trend towards creating mega-companies”. They added: “The market is being eroded by capital providers and hedge fund managers who shun efficiency in favour of scale.”

Overall, 25% of respondents (up from the figure of 23% recorded in last year’s survey) identified the cost of new regulation as the most influential factor likely to affect operating costs over the next 12 months. Finance costs featured in second place at15%, compared to 18% last year. In third place was crew supply at 14% up from 12% last year. Next came competition, down from 15% to 13%, followed by demand trends (12%) and labour costs, (11%), compared to last year’s figures of 10% and 8% respectively. Raw material costs, meanwhile, were up by one percentage point to 8%.

Richard Greiner, Partner, Shipping & Transport at BDO, says: “The predicted 2.5% and 2.7% increases in operating costs for 2019 and 2020 respectively compare to an average fall in actual operating costs in 2018 of 1.8% across all main ship types recorded in the recent BDO OpCost study.

“There were some interesting predicted cost increases in the individual market sectors. The increases in the container ship sector for 2019, for example, were the highest in every single individual category of expenditure with the exception of dry docking and management fees. The cost of hull and machinery insurance for container ships is predicted to increase by 4.8% in 2019 and by 3.3% in 2020. For protection and indemnity insurance, the comparable predicted increases are 4.1% and 3.3% respectively. By way of comparison, increases in protection and indemnity and hull and machinery insurance costs in the tanker sector for 2020 are predicated at 1.3% and 1.2% respectively.

“One year ago, overall expectations of operating cost increases for 2019 averaged 3.1%. The fall now to an estimated 2.5% must be regarded at first blush as good news. But this must be tempered by the knowledge that some significant items of big-ticket expenditure – notably those relating to the cost of complying with new regulations - are waiting in the wings.

“It is clear that shipping is well aware of the need to achieve regulatory compliance on a scale not previously envisaged or encountered by previous generations of the industry. This is only the third time that the cost of new regulations has been included in our Future Operating Costs Report, but for the second successive year it has emerged as the factor deemed most likely to have a significant influence on operating costs.

“This is not surprising, given that the immediacy of IMO‘s Sulphur 2020 regulation is enshrined in the name of the regulation itself, while the time is fast approaching for owners to make a decision on the respective merits of Ballast Water Management Convention compliance solutions.

“Shipping and its regulators have demonstrated their ongoing commitment to improving the industry’s carbon footprint, but it is clear that this will come at a price, as will the continuing drive towards greater innovation and technical excellence. A cleaner, greener and more efficient shipping industry will ultimately impact favourably on both operating costs and investor appetite. But, perversely, the process of attaining environmental and technical proficiency will add to such costs in the shorter term.

“Experienced owners and managers are well-used to optimising operating cost efficiencies, with one respondent in the survey noting how for some years now the combination of a soft insurance market, cheaper finance and a decline in crew costs had helped to keep operating cost increases below 2% over the past eight years. Current indications are that the influence of such factors is declining and on their own they are unlikely to be enough to stay ahead of the game in the coming years.

“Finance is available for viable projects, but will not come cheap. Crew costs are likely to go up rather than down in the short term. And, perhaps most significantly of all, insurance outgoings are predicted to rise over the next two years at a rate not seen for some time. There have certainly been a number of recent indications that the prolonged soft insurance market conditions in both the commercial and mutual sector may soon start to change. The reasons for this are not entirely clear, but may involve the recent deterioration in technical performance by both the protection and indemnity clubs and hull and machinery underwriters, which could in turn lead to a firming of the rates which owners are required to pay. Then again, we have seen before how difficult it can be to make premium increases stick, particularly in the commercial market.

“Shipping faces some major challenges over the next two years as it seeks to position itself as an environmentally-aware, technically-savvy industry. It must expect fluctuations in the level of operating costs caused by a variety of factors ranging from movements in oil prices to shifts in levels of manpower, from fluctuations in the value of the dollar to the ramifications of geopolitical developments around the world. The movement in some costs is easier to map and predict than in others. The movement in others still, such as the cost of regulation, is becoming easier to predict as implementation deadlines draw ever closer. The movement in yet others, such as the cost of fighting cyber-crime, can only be guessed at for the moment.

“One thing is clear. The cost of operating effectively and profitably in the modern shipping industry must be met chiefly by revenues generated from day-to-day operations. Shipping remains an optimistic industry but, if the evidence of the freight markets is to be believed, it may not be charging enough for the unique service that it provides.”


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

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
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Ship operating costs decline for seventh year in succession

International accountant and shipping consultant BDO says total annual operating costs in the shipping industry fell by an average of 1.8% in 2018, compared to the 1.3% fall for 2017. All categories of expenditure in 2018 were down overall on those for the previous 12-month period, with the exception of repairs and maintenance costs.

The findings are set out in OpCost 2019 (www.opcostonline.com), BDO’s unique ship operating costs benchmarking tool, which reveals that total operating costs for the tanker, bulker and container ship sectors were all down in 2018, the financial year covered by the study. On a year-on-year basis, the tanker index was down by 4 points, or 2.4%, compared to the 3 points (1.7%) fall the previous year. The bulker index, meanwhile, fell by 4 points, or 2.6%, compared to the 3 points (1.9%) fall recorded in last year’s OpCost. The container ship index was down by 2 points, or 1.3% - identical to the fall recorded for the previous 12 months.

There was a 1.1% overall average decrease in 2018 crew costs, compared to the 2017 figure of 0.1%. By way of comparison, the 2008 report revealed a 21% increase in this category. Tankers overall experienced a fall in crew costs of 1.8% on average, compared to the 0.5% fall recorded last year. All categories of tankers reported a reduction in crew costs for 2018 with the exception of Panamax Tankers, which recorded an increase of 0.1%, compared to a reduction for 2017 of 0.7%. The most significant reduction was the 2.7% recorded by Aframax Tankers, which also recorded the biggest reduction in 2017 at 1.7%.

For bulkers, meanwhile, the overall average fall in crew costs in 2018 was 1.1%, compared to 0.6% recorded for the previous year. Handymax Bulkers recorded a 2.3% fall in 2018, with a 1.7% fall for Panamax Bulkers and 0.1% for Handysize Bulkers. Capesize Bulkers were the only category of bulker to record an increase in crew costs, of just 0.1%, compared to the fall the previous year of 0.8%.

As was the case in 2017, there was zero overall increase in expenditure on crew costs in the container ship sector in 2018. The last overall movement for this category of ship was the 1.1% fall recorded for 2016. With the exception of vessels of between 2,000 and 6,000 teu, all categories of container ships recorded a fall in crew operating costs in 2018. In the case of ships between 6,000 and10,000 teu, the fall was 2.7%, equalling the figure recorded by Aframax Tankers as the largest reduction in crew costs recorded in OpCost 2019.

Expenditure on stores was down by 4.9% overall, compared to the fall of 3.5% in 2017. Mirroring the results in the previous year, all vessels in all categories recorded a fall in stores costs for 2018, none bigger than the 7.6% recorded by container ships of between 2,000 and 6,000 teu. In the tanker sector, the most significant fall was the 6.4% posted by Aframax Tankers. Panamax Bulkers and Capesize Bulkers led the way in the bulker sector, each recording a 6.7% reduction in stores expenditure.

For tankers overall, stores costs fell by an average of 4.8%, compared to the 4.5% recorded for 2017, while in the bulker sector the reduction was 6.1%, compared to a fall of 3.6% in 2017. In the container ship sector, meanwhile, there was a 5.7% fall in stores expenditure, compared to a drop of 3.4% the previous year.

There was an overall increase in repairs and maintenance costs of 0.6% in 2018, compared to the reduction of 1.7% in 2017. Both categories of chemical tanker posted increases, led by the 1.6% increase posted by Chemical Tankers 40,000 to 50,000 dwt. There were also significant increases in the container ship sector, most notably in the case of ships of between 1,000 and 2,000 teu and between 2,000 and 6,000 teu (3.1% and 2.9% respectively).

In the tanker sector, Suezmax owners spent 2.3% more on repairs and maintenance in 2018 than they did in the previous year, while increases were also posted for Tankers 5,000 to 10,000 dwt (1.2%) and Handysize Product Tankers (1.1%). Repairs and maintenance costs were also up in the bulker sector for Capesize Bulkers (1.5%) and Handysize Bulkers (0.3%). Product Tankers, meanwhile, recorded the largest fall of 1.6% across all categories.

For tankers and bulkers overall, there was zero overall increase in repairs and maintenance costs in 2018, compared to the falls of 3.4% and 1.5% recorded in 2017. In the container ship sector, however, there was a 3.2% overall increase in repairs and maintenance costs in 2018, compared to zero movement the previous year.

The largest overall drop in operating costs in 2018 was the 7.1% fall recorded for insurance, compared to the 4.1% fall in 2017. Ro-Ros were the only category of vessel to record any increase in insurance costs (1.7%). Everywhere else, there were sizeable reductions in insurance outgoings, none bigger than the 9.9% posted for Handysize Product Tankers. Not far behind were Chemical Tankers 15,000 to 40,000 dwt (9.8%), Panamax Bulkers (9.7%) and container ships of between 1,000 and 2,000 teu (9.3%).

For tankers overall, there was an 8.3% fall in insurance costs in 2018, compared to the 3.4% reduction in 2017. For bulkers, the reduction was 8.5%, compared to 6.0% the previous year, and for container ships the corresponding figures were 7.6% and 5.8%.

Richard Greiner, Partner, Shipping & Transport at BDO, says, “This is the seventh successive year-on-year reduction in overall ship operating costs recorded by OpCost, and will doubtless be regarded as good news throughout the industry. However, at the same time, the solitary overall increase across all categories of operating costs in 2018, that in respect of repairs and maintenance, should be regarded as encouraging news on a number of levels. It indicates an ongoing commitment to the increasing imperative of regulatory compliance, to maintaining safety and protecting the environment, and to continued operation. Moreover, it does nothing to confound the incipient belief that shipping may be displaying signs of a slow recovery to improved profitability. Nobody spends money on repairs and maintenance for vessels that are not expected to trade. Increasingly, vessels that do not meet industry standards will find it difficult to continue trading as regulation bites harder and more comprehensively on a global scale.

“In 2018, as was the case the previous year, the biggest cost reductions were to be found in insurance, reflecting, among other things, the intense competition for business in insurance markets throughout the world. The next biggest level of reductions came, as was again the case in 2017, in the stores category, a trend largely driven by the fall in the cost of lube oils.

“The smallest of the reductions in operating expenditure in 2018, as was the case in the previous year, came in the crew costs category, down by just over 1% on the previous year. Crew costs have been one of the most volatile elements of operating expenditure in the modern shipping industry, but there are reasons to believe that such volatility is likely to decrease. There are a variety of factors impacting crew costs, including fluctuating trade levels, the improved bargaining position enjoyed by seafarers under the MLC 2006 Convention, the emergence of professionally trained crews from dedicated institutions in developing countries, technological advances resulting in reduced manpower requirements, and the continuing difficulty of finding sufficient numbers of certain specialist officers and crew. These factors should balance each other out over time so that increases of more than 20% in crew costs are at least unlikely to be seen - increases the industry has witnessed and survived in previous years.

“Shipping is used to fluctuations in costs and industry fortunes. For example, OpCost records that, at year-end 2008, the average daily operating cost for a Panamax Bulker was US$6,321; in 2018, it was US$5,472. For a Handysize Product Tanker, the comparable figures are US$7,908 and US$7,285.

“Shipping’s fortunes will continue to fluctuate, but confidence is holding up well, notwithstanding the impact of political and economic issues. It should continue to do so, given a favourable wind and a continuing appetite for investment in an industry which is increasingly embracing technological innovation and environmental awareness as a means to increase efficiency and improve cost-efficiency. Whilst there remains the need to fund the costs of technological improvements, over time that investment should lead to improved profitability.”

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

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

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


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

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The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
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media@bdo.co.uk

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Concern over trade wars impacts shipping confidence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

http://www.bdo.uk.com/news.html
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Shipping confidence dips but investment appetite remains undimmed

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

The average confidence level expressed by respondents fell to 6.0 out of a maximum score of 10.0, compared to the 6.3 recorded in August 2018.

Confidence on the part of all main categories of respondent was down, with the exception of brokers, where the rating increased from 4.9 to 5.2. Owners’ confidence fell to 6.4 from 6.8, which was originally the second highest achieved by this category of respondent in the life of the survey. The confidence rating for managers, meanwhile, was down from 6.2 to 6.0 and that for charterers from 7.0 to 6.8. The survey was launched in May 2008 with an overall rating for all respondents of 6.8 out of 10.0.

Confidence was down in Europe, from 6.2 to 6.1, and in North America, from 6.8 to 5.2, but held steady in Asia at 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 unchanged at 5.5 out of a maximum score of 10.0. Owners’ confidence was down from 6.5 to 6.3, but that for charterers was up from 4.0 to 6.6. Expectations of major investments were up in Asia from 6.1 to 6.2, but down in Europe from 5.3 to 5.2.

The number of respondents who expected finance costs to increase over the coming year was up from 59% to 67%. The figure for owners was up from 70% to 71%, while the figures for charterers and managers were up from 50% to 80%, and from 45% to 63% respectively. The rating for brokers was unchanged at 71%.

Competition, identified by 21% of respondents, overtook demand trends (20%) as the factor expected to influence performance most significantly over the next 12 months, with finance costs (16%) in third place.

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was up by seven percentage points on the previous survey to 60%, while those expecting lower rates was up from 9% to 12%. In the dry bulk sector, expectations of rate increases were unchanged at 38%, accompanied by a four percentage point increase to 15% in the numbers anticipating lower rates. The numbers expecting higher container ship rates, meanwhile, fell by one percentage point to 25%, compared with 24% anticipating lower rates. Net freight rate sentiment in the tanker sector was +48, in dry bulk +23, and container ships +1.

In a stand-alone question, 24% of respondents said they expected the price differential between high-sulphur fuel oil and IMO-compliant low-sulphur fuel oil at 1 January 2020 to be between $250 and $324 per metric tonne. 23% put the figure at between $175 and $249, while 18% estimated it at between $325 and $399. 12% thought the cost differential would be between $100 and $174.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says: “It is disappointing to close the year with a small downward tick in confidence. But shipping is nothing if not volatile, and there will always be ups and downs. We should not forget, either, that it was in 2018 that confidence reached a four-year high.

“It is encouraging to see that the appetite for new investment was not deterred by the drop in confidence. New investment is something that will clearly be needed moving forward, not least to fund expenditure on the technology necessary to achieve compliance with existing and evolving regulatory requirements, and this against a backdrop of rising finance costs over the coming year.

“It is noteworthy that almost a quarter of our survey respondents thought the price differential between high-sulphur fuel and IMO-compliant low-sulphur fuel come 1 January 2020 would be between $30 and $100 per metric tonne more than it is at present.

“Increased costs are inevitable. Increased earnings are essential.”

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

Ten years after, shipping industry confidence holds firm

Shipping confidence held steady in the three months to end-May 2018 according to the latest Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents was unchanged at the four-year high of 6.4 out of 10.0 recorded in February 2018. Confidence on the part of owners was also sustained at a four-year high, of 6.6, while managers’ confidence was up from 6.4 to 6.7. The rating for charterers was up to 6.7 from 5.0 and confidence in the broking sector was up from 6.1 to 6.3. The survey was launched in May 2008 with an overall rating for all respondents of 6.8.

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey from 5.5 to 5.2 out of a maximum possible score of 10.0. Confidence was highest among charterers, followed by owners (down from 5.9 to 5.5), managers (down from 5.6 to 5.4) and brokers (down from 4.0 to 3.5).

The number of respondents who expected finance costs to increase over the coming year was down to 63% from 64% last time. Whereas, in the previous survey, charterers were unanimous in expecting finance costs to increase, just a third were of that opinion this time.

The number of respondents expecting higher freight rates in both the tanker and container ship sectors was up, from 39% to 50% and from 38% to 43% respectively. In the dry bulk trades, such expectations were unchanged at 54%. Net sentiment in the tanker sector was +41, in the dry bulk trades +43, and for container ships, +32.

When asked to estimate the level they expected the Baltic Dry Index (BDI) to reach in 12 months’ time, 42% of respondents anticipated a figure of between 1500 and 1999, compared to 25% a year ago. Meanwhile, 36% put the likely level at between 1000 and 1499, contrasting with 52% a year ago.

Richard Greiner, Moore Stephens partner, Shipping & Transport, says, “It is two years since our survey reflected any decline in confidence. Net freight rate sentiment was significantly up in all the main tonnage categories. Shipping still has problems to overcome, but it continues to punch above its weight in terms of optimism.”

The survey was launched in 2008 just months before the Lehman Brothers bankruptcy which was to trigger a protracted global financial recession. Shipping markets were buoyant at the time, with an average confidence level of 6.8 out 10.0.

Over the past ten years, confidence averages out at 5.8 out of 10.0. The low point was the 5.0 out of 10.0 recorded in February 2016, since when it has only improved or been maintained. The 2010 financial crisis in Greece may have been a prime factor in the fall in confidence to 5.3 in August 2011, but thereafter began a period of fluctuation before a gradual recovery beginning in 2016 which appears not to have been affected by the birth of Brexit that year.

Over the life of the survey, demand trends have been the factor deemed most likely to affect performance, identified by an average 24% of respondents, followed by competition (20%) and finance costs (16%).

The ten-year averages for operating costs (10%), fuel costs (8%) and crew supply (5%) are all below the corresponding averages of 12%, 11%, and 11% for May 2008, doubtless due to the effects of the economic downturn and fluctuations in the price of oil. Ten years ago, regulation was cited by just 2% of respondents as a significant performance-affecting factor. Today it stands at 10% and averages 4% over the decade.

Over the last decade, an average of 48% of respondents have been of the view that finance costs were likely to rise over the coming year. When the survey was launched in May 2008, 66% of respondents were of that opinion. By February 2009, the numbers had dropped to 47% and, by 2015, to 32%. Today, the figure stands at 63%.

Ten-year averages for the freight markets reveal a sizeable increase in expectations of higher dry bulk and container ship rates. Net sentiment in dry bulk was -3 in May 2008, but the 10-year average is +24. The corresponding figures for container ships are +2 and +15. Ten-year net sentiment in the tanker sector, meanwhile, was +20 in 2008, and averaged +19 over the decade. In all three tonnage categories, current expectations of higher rates are significantly above those of ten years ago.

When the survey was launched, respondents rated at 5.9 out of 10.0 the likelihood of making a major investment or development over the next twelve months. The average for the ten-year period is 5.3. Expectations peaked at 6.0 out of 10.0 in August 2010 but reached a low of 4.8 in February 2016.

Richard Greiner says, “The survey reflects the sentiments of a volatile industry in a particularly volatile decade. Significant events have included the peak of a boom, a prolonged global financial recession, crises in the banking sector, the collapse of stock markets, the Greek debt crisis, Brexit, and an unprecedented level of government and industry bail-outs.

“Ten years is a long time in shipping, and the past decade has doubtless felt a lot longer still to those industry participants who have lived through it, even those inured to the peculiar cyclicality of the industry. Confidence may have fluctuated, but it has never collapsed, and portents for the coming decade can reasonably be expected to be better.”

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

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 continues to edge upwards

Shipping confidence reached its highest rating in the past three years in the three months to end-August 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 slightly from the 6.1 out of 10.0 recorded in the previous survey in May 2017 to a three-year high of 6.2. The improved rating was attributable mainly to increased confidence on the part of owners, up from 6.1 to 6.5. Confidence levels on the part of brokers, meanwhile, fell from 6.4 to 6.3, while managers and charterers recorded more substantial drops – from 6.2 to 5.8 and from 6.4 to 4.7 respectively, the lowest levels in both cases since May 2016. The survey was launched in May 2008 with an overall confidence rating of 6.8.

Confidence levels were significantly up in Asia from 5.6 to 6.4, their highest level since May 2014. Confidence was also up in Europe, from 6.2 to 6.3, but down in North America, from 6.4 to 5.8.

Despite familiar concerns about excess tonnage capacity in many trades and continuing uncertainty over Brexit, several respondents saw reasons for optimism over the coming 12 months, not least as a result of what one described as “some green shoots of a relatively broad-based rebound in economic activity.” This helped maintain, at a three-year high, expectations of major investments being made over the next 12 months. Concern, however, persisted over political instability, the incipient cost of increased legislation, and the probable entry into the market of low-cost newbuildings.

One respondent said: “The future of the maritime industry will certainly be interesting, but will it also be enjoyable?”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged from the previous survey at 5.4 out of a maximum possible score of 10.0. This represents the highest level achieved since August 2014, and this despite a slight fall this time (from 5.9 to 5.8) in the expectations of owners, and a much larger one (from 6.3 to 4.0) by charterers. The expectations of respondents in Asia were up, from 5.1 to 5.9, but down in Europe, from 5.4 to 5.2.

As was the case in the May 2017 survey, 50% of respondents expected finance costs to increase over the coming year. Owners’ expectations were unchanged at 48%, but both managers and charterers (where the figures were up from 57% to 62% and from 57% to 67%, respectively) were anticipating dearer finance. Brokers were alone among the main categories of respondent in recording a fall (from 63% to 42%) in the numbers expecting finance costs to go down.

Demand trends, cited by 27% of respondents, continued to be the factor expected to influence performance most significantly over the next 12 months, followed by competition (17%) and tonnage supply (15%), the latter displacing finance costs in third place. One respondent said: “Confidence is impaired by the inexperience of investment houses resulting in over-liquidity in the market, which feels that it has to spend just for the sake of it – a ‘greed-eats-brain’ mentality.”

The number of respondents expecting higher rates over the next 12 months in the tanker market was up on the previous survey, from 32% to 45%, while there was a 2% fall, to 14%, in those anticipating lower tanker rates. Meanwhile, although there was a two percentage-point fall, to 56%, in the numbers anticipating higher rates in the dry bulk sector, this was still the second-highest figure in three-and-a-half years. In the container ship sector, the numbers expecting higher rates dropped by six percentage points to 40%, while there was a five percent increase, to 17%, in those anticipating lower container ship rates.

Net sentiment was positive in all the main tonnage categories, and up in the tanker market from +16 in May 2017 to +31 this time. There were meanwhile small declines in net sentiment in the dry bulk and container ship trades, from +50 to +49 and from +34 to +23 respectively.

In a stand-alone question, respondents were asked to rank in order of priority what they considered to be the most significant new sources of finance for shipping over the next 12 months. Bank finance emerged as the first choice of 27% of respondents, followed by private equity (18%). Lease finance (14%) featured in third place, one percentage point ahead of shareholder funds. One respondent said: “Banks are being a lot tougher with owners, and it is good to see the demise of the CV and KG systems which generally did little to help the long-term viability of the industry.” Another observed: “For good owners, there is still capital available. But the worry is for the second and third-rung owners.”

Richard Greiner, Moore Stephens Partner, Shipping & Transports, says: “Another three months, and another rise in confidence in the shipping industry, albeit a small one. Confidence has been increasing steadily over the past 15 months, and industry players are more confident of making a major investment over the coming year than they have been at any time in the past three years. Moreover, net sentiment in all three main tonnage categories is positive, having almost doubled in the tanker sector over the past quarter.

“This welcome boost in confidence comes at a difficult time for the industry, beset by overtonnaging in many trades, the current and impending cost of regulatory compliance, and more widely by geo-political pressures. Clearly, shipping still has a lot to offer existing and new investors alike, both traditional and external.

“To some extent, success in the shipping industry is a question of being in the right place at the right time. But there is a lot of skill, knowledge and experience involved, too. It is good to see that confidence is still on the increase. They do say that it’s the hope that kills you but, in truth, the lack of it is likely to be far more damaging.”

To download a copy of the survey report please visit the Moore Stephens website:
https://www.moorestephens.co.uk/news-views/september-2017/shipping-confidence-continues-to-edge-upwards

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

Shipping confidence holds steady despite industry and political pressures

Shipping confidence held steady in the three months to end-February 2017, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In February 2017, the average confidence level expressed by respondents was 5.6 out of 10.0, unchanged from the previous survey in November 2016 and equal to the highest rating since August 2015. Owners were the only main category to show an improved level of confidence, up from 5.4 to 5.6. Confidence on the part of charterers was down from its all-time survey high of 6.8 to 5.9, while that of managers fell from 6.4 to 6.0. Confidence levels in the broking sector, meanwhile, dropped from 5.6 to 4.6. The survey launched in May 2008 with an overall confidence rating of 6.8.

Confidence was up in Europe and North America, from 5.4 to 5.5 and 5.9 to 6.1 respectively, but down from 5.7 to 5.6 in Asia.

Respondents generally felt that competition was running at very high levels, while other familiar concerns included overtonnaging and geopolitical uncertainty. Most respondents saw 2017 as a year of retrenchment rather than improvement. One said, “If owners can maintain their discipline and resist the blandishments of shipyards desperate for business, there is hope that 2018 will see a return of market equilibrium, in which continued scrapping remains a key element.” Another, meanwhile, noted, “The current state of most shipping markets, coupled with the weakness of banks, means that conditions should be more attractive for alternative lenders.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged for the fourth successive quarter, at 4.9 out of 10.0. Managers’ expectations were up from 5.2 to 5.6, the highest level since August 2015. Owners’ expectations were also up, from 5.0 to 5.1, but those of charterers and brokers were down, from 6.4 to 5.8 and 3.8 to 3.4 respectively.

The number of respondents expecting finance costs to increase over the coming year rose by one percentage point to 54%, the highest level since November 2011. Owners’ expectations of increases fell from 58% to 57%, while the figures for brokers were also down, from 53% to 41%. Managers were of a different mind, with 61% expecting increases as opposed to 52% in November 2016.

Demand trends overtook competition as the factor expected to influence performance most significantly over the next 12 months, followed by finance costs and tonnage supply. “Competition is so intense at the moment,” said one respondent: “that you either accept what is offered or a competitor will take the cargo.”

The number of respondents expecting higher rates in the tanker market over the next 12 months fell by eight percentage points to 25%, while the number anticipating lower tanker rates rose from 24% to 28%. Meanwhile, there was a three-percentage-point rise, to 44%, in the numbers anticipating higher rates in the dry bulk sector, although one respondent remarked, “The dry bulk freight market will continue to be tough, with returns not much above break-even”. In the container ship sector, the numbers expecting higher rates rose from 27% to 31%, while there was a three-percentage-point fall, to 18%, in those anticipating lower container ship rates. The net sentiment in the tanker markets was -3 (compared to +9 in November 2016), while it was +33 (up from +31 last time) in the dry bulk markets and +13 (compared to +6 in the previous survey) in the container ship trades.

In a stand-alone question, respondents were asked to identify the price range they expected crude oil (per-barrel) to be in 12 months’ time. The most popular estimate was the $50-$59 range, identified by 38% of respondents, as opposed to 19% in the February 2016 survey. Meanwhile, 12% of respondents opted for the $40-$49 range compared to 26% last time. The $60-$69 price range was favoured by 29%, as opposed to just 5% one year ago. In February 2016, 31% predicted crude oil prices to be in the $30-$39 price range, whereas just 1% did so this time.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “After three successive quarterly increases, shipping confidence has held steady. This is encouraging given the continuing political uncertainty in the US and Europe. Shipping is vulnerable to changes in the political landscape, and a slew of elections in leading industrialised nations will render it particularly so this year.

“Elsewhere, the issues facing the industry include an over-supply of ships and insufficient demolition. Freight markets are dragging along the bottom in many sectors, with net rate sentiment in the tanker market being particularly low. Add to this the expectation of higher ship finance costs, the mounting costs of regulation, the threat of cyber-crime and projected increases in operating costs and it is evident that shipping will not be a picnic for the foreseeable future.

“But shipping is not a natural fit for the pessimist, and those with meaningful experience of the industry will be looking with some justification for a re-strengthening of rates in the tanker and dry-bulk trades, supported by continued rationalisation of newbuilding plans and accelerated recycling levels. Meanwhile, oil prices will continue to go up, which is mixed news for the shipping industry. For those who can effectively manage risk and volatility, shipping is still the place to be.”

The full survey report can be downloaded from the Moore Stephens website:
http://www.moorestephens.co.uk/News-views/March-2017/shipping-confidence-industry-political-pressures


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

Optimistic charterers help boost shipping confidence to 15-month high

Shipping confidence improved for the third successive quarter in the three months to end-November 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In November 2016, the average confidence level expressed by respondents was 5.6 out of 10.0, equalling the highest rating since August 2015. All main categories of respondent were more confident than in August 2016, when the overall rating was 5.4. Charterers’ confidence this time increased by 2.0 points, to 6.8, the highest figure in the life of the survey for such respondents. The confidence of owners was up from 5.3 to 5.4, of brokers from 4.5 to 5.6, and of managers from 6.0 to 6.4. The survey was launched in May 2008 with an overall confidence rating of 6.8.

Confidence was up in Asia, from 5.5 to 5.7, in Europe from 5.2 to 5.4, and in North America from 5.8 to 5.9.

A number of respondents felt that the bottom of the cycle had been reached and that the only way was up. Particular concern was expressed about overtonnaging, insufficient recycling, and the cost of regulatory compliance. One respondent noted, “The oversupply of tonnage will cease when the banks write down bad loans and force owners to sell for scrap,” while another said, “The weak or unlucky will fold or be gobbled up, while the strong or the lucky will grow and succeed.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged, at 4.9 out of 10.0. Charterers’ confidence in this regard was up from 5.0 to 6.4, equalling its highest figure since August 2013. Owners’ expectations were also up, from 4.8 to 5.0, but those of managers and brokers were down, from 5.3 to 5.2 and from 4.1 to 3.8 respectively. According to one respondent, “It is hard to see how major investment to meet environmental regulations can be justified in the current climate.”

The number of respondents expecting finance costs to increase over the coming year rose from 35% to 53%, the highest level for five years. Owners’ expectations in this regard rose from 31% to 58%, their highest level since May 2011. The figures for brokers and managers were also up, from 47% to 53% and from 30% to 52%, respectively. Charterers were alone in not anticipating any increase in finance costs. “Major investment will be required over the next few years to meet increasingly stringent environmental regulations,” said one respondent, “at a time when earnings are on the floor and bank finance is hard to come by.”

Competition is expected to influence performance most significantly over the next 12 months, just ahead of demand trends, followed by finance costs and tonnage supply. One respondent said, “If demand remains weak, we don’t anticipate any improvement in the shipping markets over the next five years, particularly for dry bulk cargoes.”

The number of respondents expecting higher rates in the tanker market over the next 12 months rose by ten percentage points to 33%, the highest figure since August 2015, while the number anticipating lower tanker rates fell from 37% to 24%. Meanwhile, there was a three percentage-point rise, to 41%, in the numbers anticipating higher rates in the dry bulk sector. In the container ship sector, the numbers expecting higher rates rose from 22% to 27%, but there was a five percentage-point increase, to 21%, in those anticipating lower rates. The net sentiment in the tanker markets was +9, while it was +31 in the dry bulk markets and +6 in the container ship trades.

In a stand-alone question, respondents were asked what they considered would be the most important source of funding for the installation of Ballast Water Management (BWM) systems by shipowners. Overall, on a weighted average basis, 21% of respondents felt that shipowner equity (shareholder funds) would provide the source of funding. Next came bank finance, at 19%, BWM system manufacturers (15%), shipyards (12%) and other non-bank finance (10%). One respondent said, “Financing BWM is almost impossible. Owners have no money for it.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “This is the third successive increase in shipping confidence recorded by our survey. So despite overtonnaging, weak freight rates, declining demand, insufficient recycling, Brexit, Syria, Trump, despite everything, shipping is still looking up, rather than down. This is not to deny the reality of today’s difficult market, or the sluggish economic climate. But it does say much for the strength of shipping’s backbone and the quality of its mettle.

“Those who can point to a long history in shipping will be better placed to gauge the severity and longevity of the current downturn than those with a shorter pedigree in the industry. But both will need access to finance and to other resources in order to meet the challenges which lie ahead. Not the least of these is the ongoing regulatory environmental compliance programme, even if implementation of the BWM convention may be caveated with potential delay and amendment for a little while longer.

“Many of our respondents felt that things can only get better. They are probably right. But for that to happen, freight rates will have to go up. Perhaps it is safer to say for the moment that, if we want things to stay as they are, things will have to change.”

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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk.


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

Moore Stephens reports second successive quarterly rise in shipping confidence

Shipping confidence, notably on the part of charterers and managers, improved for the second successive quarter in the three months to end-August 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

In August 2016, the average confidence level expressed by respondents was 5.4 on a scale of 1 (low) to 10 (high). This is an improvement on the 5.1 recorded in May 2016, and the highest rating for the past nine months of the survey, which was launched in May 2008 with a confidence rating of 6.8.

Although confidence on the part of owners was down this time from 5.7 to 5.3, charterers (up from 4.0 to 4.8), managers (up from 5.1 to 6.0) and brokers (up from 4.3 to 4.5) were all more optimistic than in May 2016. Geographically, confidence was up in Asia, from 5.2 to 5.5, and in North America from 5.0 to 5.8, with sentiment in Europe unchanged at 5.2.

Overcapacity was the dominant theme of comments from respondents to the survey. “Scrapping is still not sufficient to cope with newbuilding deliveries and the general supply-side overhang. Every new order will prolong the crisis,” said one, while another noted, “If we all stay away from ordering relatively cheap tonnage today, supply and demand will soon recover.”

Conditions in the dry bulk market also occupied the thoughts of large numbers of respondents. “Implementation of the Ballast Water Management Convention will most likely solve overcapacity,” said one, “but it will also cause a bloodbath among owners.” Another remarked, “Growth is non-existent, so there is no hope there,” while another still simply said, “We have lost confidence in the dry bulk market.” Other respondents were slightly more optimistic, with one noting, “We expect the dry bulk markets to improve significantly during the course of 2017.”

Concerns about the global economy were uppermost in the minds of a number of respondents, one of whom neatly encapsulated a number of the main issues currently impacting the shipping industry by noting, “Brexit, Trump, supply overhang, consolidation, demolition, bankruptcies, and the low risk appetite of banks for shipping and shipping stocks seem to be the main topics to follow for the next 12 months or so. We would be pleasantly surprised if this were to change.”

The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged on the previous survey, with a rating of 4.9 on a scale of 1 to 10. The confidence of charterers in this respect was up significantly, from 4.1 to 5.0, while brokers also recorded a small increase, from 3.5 to 4.1. Owners and managers, however, were less confident in this regard than they were three months ago, dropping from 5.7 to 4.8 and from 5.4 to 5.3 respectively. One respondent said, “Massive investment, mainly from inexperienced funds and private entrepreneurs, has resulted in an oversupply of funding in some trades.”

The number of respondents who expected finance costs to increase over the next 12 months was down by six percentage points, to 35%. There was a noticeable fall in the numbers of owners (down by six percentage points to 31%), managers (down by 19 percentage points to 30%) and charterers (down by two percentage points to 27%) anticipating higher finance costs. One respondent said, “Shipping banks need to be more realistic about pricing if they want to sell debt as a means of reducing their exposure to the sector.”

Demand trends, competition and tonnage supply featured again as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (down by three percentage points to 20%) in second. Tonnage supply, unchanged at 16%, occupied joint-third spot with finance costs, which were up by one percentage point. Operating costs, up by one percentage point to 10%, featured in fifth place, ahead of fuel costs (5%) and regulation (4%). One respondent said, “We have read many, many times that we have reached the bottom of the cycle, only for a lower offer to appear in the market a few hours later.”

The number of respondents expecting higher charter rates in the tanker market over the next 12 months was unchanged at 23%, while the numbers anticipating lower tanker rates rose by three percentage points to 37%. Meanwhile, there was a five percentage-point drop, from 43% down to 38% in the numbers of like mind in the dry bulk trades, and a one percentage point increase, to 12%, in the numbers anticipating lower dry bulk rates. In the container ship sector, the number of respondents expecting higher rates was up by one percentage point to 22%, while there was a fall, from 20% to 16%, in the numbers anticipating lower rates.

The net sentiment in the tanker markets was -14, as opposed to +26 in the dry bulk markets and +6 in the container ship trades.

One respondent said, “Too many dry cargo ships have been built, and we are not confident that the freight market will improve sufficiently to justify investment, especially from people who have no previous experience of shipping.” Another remarked, “A whole class of container ships is essentially obsolete following the opening of the widened Panama Canal.”

Respondents were asked a stand-alone question about the perceived barriers to women playing a greater role in the shipping industry. Overall, 31% of respondents placed ‘workplace attitude or corporate culture’ in the top five factors in this regard. ‘Travel implications in day-to-day roles’, meanwhile, was a top five factor for 21% of respondents, while ‘lack of career progression’ was placed third, at 19%. One respondent said, “There are no barriers. It is up to the individual to pursue her career with determination and strength of character.” Another, however, complained that, “The culture in the industry is male chauvinist.”

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says, “Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the ongoing level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry.

“Concern persists about too much tonnage and not enough recycling. Restoring the correct balance to tonnage supply and demand is a long-term undertaking, the complexities and diverse nature of which are arguably well captured by the respondent who noted, ‘We have divided interests. For our customers, we hope that nobody orders any vessels for the next 12 months. For us, we hope that people do, because we need newbuildings’.”

“Given the pace of technological development, the continuing imperative to improve the industry’s environmental footprint, and the exigencies of escalating regulation, the industry will always need newbuildings. The trick is to make sure that there is room – and work – for them in a market which encourages responsible competition and allows a sensible margin for profit. That requires, among other things, an increase in ship demolition levels which, given the recent decline in dry bulk recycling and the perceived impossibility of recycling enough container ships, seems unlikely.

“The maintenance of sensible levels of competition is also a prerequisite for a healthy and profitable shipping industry. Since the survey was launched in 2008, respondents have consistently identified competition as one of the main factors likely to influence their performance most significantly. All trade sectors thrive on responsible competition, which works as an incentive to progress and profitability. But irresponsible competition can have the opposite effect, witness the respondent who referred to ‘those who focus on how to trick, treat and corrupt under the broad term ‘competition’.”

“Perversely, the collapse of Hanjin Shipping Co., which occurred after our survey was concluded, may have a positive effect on overtonnaging, although nobody would have been looking for such an extreme solution. Hanjin’s collapse has sent shockwaves through the industry which will continue to reverberate for many months to come. It may also give pause for thought to those who see the future of container shipping as ever bigger and more diverse alliances.

“Equally perverse is the very real possibility that final ratification of the Ballast Water Management Convention may have a positive effect on overcapacity. It might not be correct to say that this development has sent shockwaves through the shipping sector, because the industry has known for some time that it has been coming, and has been pondering how best to meet its requirements and how to fund the considerable cost of so doing. It matters not whether it was the ratification by Finland which finished the uncertainty about implementation, or whether it was Panama’s huge fleet which activated the green light. A shock is no less shocking for being expected, and the fact is that the convention will enter into force in September 2017. It will be instructive to see how shipping deals with the issue, and from what level of preparedness, the extent of which will become clearer over the coming months.

“A stand-alone question in our survey asked respondents to name the biggest barriers to women playing a greater role in today’s shipping industry. More than 65% identified ‘workplace or corporate culture’ as the number one barrier. James Brown famously sang, ‘This is a Man’s World’, although not everybody remembers that the self-styled Godfather of Soul went on to say, “but it wouldn’t be nothing without a woman or a girl’. It is beyond any reasonable measure of doubt that shipping will need the efforts of every man and woman working within the industry today to tackle both current challenges and those which lie in wait.”

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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 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 reports new low in shipping confidence

Overall confidence levels in the shipping industry fell to a record low in the three months to February 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The average confidence level expressed by respondents in the markets in which they operate was 5.0 on a scale of 1 (low) to 10 (high). This compares to the 5.6 recorded in November 2015, and is the lowest rating in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.

All main categories of respondent with the exception of brokers (up from 4.6 to 5.1) recorded a fall in confidence this time, most notably charterers (down from 5.5 to 3.9), which is the lowest confidence rating by any category of respondent in the history of the survey. Confidence on the part of owners and managers was also down, from 5.7 to 4.8 and from 5.8 to 5.5 respectively.

Geographically, confidence was down in all major areas covered by the survey – in Asia from 6.0 to 4.4, in Europe from 5.4 to 5.1, and in North America from 5.7 to 4.7.

A number of respondents continued to express concern about the level of overtonnaging, with one pointing out, “Newbuilding deliveries for 2016 will increase the total fleet by 10.5%, 7% of the current fleet is older than 20 years, and cargo volumes in 2015 were just 4.5% higher than in 2014, so the expected available fleet per metric ton of dry cargo available will be higher at the end of 2016 than it is now. As a result, there is no chance of freight levels improving.” Another respondent said, “As long as shipowners operate based on hope rather than on solid economics, there will always be booms and busts.”

Particular concern was expressed about the state of the dry bulk market, with one respondent commenting, “No dry bulk business makes any remote sense. There are too many players, too many operators, and too many vessels chasing too few cargoes. Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cashflow is coming in.” Elsewhere it was noted, “Dry bulk is simply at the bottom of the bottom, and actually a little lower than that.”

The need for accelerated demolition was also identified by a number of respondents, one of whom noted, “Scrapping activity is far from sufficient to compensate for incoming new tonnage.” Another observed, “Low scrapping prices provide little motivation for owners to demolish ships,” although another still said, “Increased scrapping may help achieve equilibrium in the dry bulk sector sooner rather than later.”

Falling oil prices were also a recurring topic in responses to the survey. One respondent said, “Global bulk oil movements will be the key to conditions in the tanker market over the next 12 months. With storage facilities almost full to capacity, there will be nowhere to stock additional supplies unless global economies pick up and oil production is regulated.” Other respondents, meanwhile, saw some solace in soft oil prices, typified by the comment that, “The wet markets stand a better chance of remaining profitable on the back of weak crude oil prices.” Elsewhere, however, there was concern about the effect of falling oil prices on the offshore maritime sector, with one respondent noting, “There are companies in the offshore shipping market which are under pressure and in potential danger of being shut down.”

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey, on a scale of 1 to 10, from 5.2 to 4.8, which equals the figure recorded in February 2009 as the lowest in the life of the survey to date. Owners, managers and brokers were less confident in this regard than they were three months ago, but the confidence of charterers was up, from 4.8 to 5.1. One respondent said, “We are paying for excessive investments over the past five years by speculative funds that would win an Oscar for the quickest/largest destruction of capital in the shipping world.” Another said, “Weak demand is undermining confidence and investment.”

The number of respondents who expected finance costs to increase over the next 12 months was down by five percentage points on last time, to 42%. The number of charterers anticipating dearer finance fell by 11 percentage points to 56%, but the number of owners of like mind rose by one percentage point to 36%. The number of brokers expecting a rise in finance costs, meanwhile, fell from 75% to 36%. One respondent said, “Millions of dollars are lost each day by owners, and soon will be by bankers. We are navigating very risky waters.” Another noted, “There is no future in this industry unless all sectors, including financiers, take a more in-depth approach.”

Demand trends, competition and tonnage supply featured as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (unchanged at 21%) in second place. Tonnage supply, at 15%, occupied third place, one percentage point ahead of finance costs. Operating costs, up by six percentage points to 12%, featured in fifth place, ahead of fuel costs and regulation at 4%, the latter representing a five percentage-point drop on the figures for November 2015.

One respondent said, “Demand has let us down at the most inopportune moment possible,” while another predicted, “Competition will remain fierce and only by aggressive marketing will we achieve growth.”

There was a 16 percentage-point increase in the number of respondents anticipating lower freight rates in the tanker markets. But there was a small increase in the number of respondents anticipating higher rates in the dry bulk and container ship sectors, compared to the figures for November 2015. The net sentiment in the tanker market was -23, but +22 and +8 in the dry bulk and container ship sectors respectively.

“Tankers should be able to benefit in 2016 from the lack of market consensus over oil price movements, with longer-term decisions delayed as operators search for direction,” noted one respondent, while another commented, “Dry bulk provides opportunities for investment only for cash-rich owners who can afford to lose in the near term.” In the container ship sector, meanwhile, the point was made that, “Sometimes it seems that container ship operators are guided more by market share considerations than by sound economics.”

Respondents were asked a stand-alone question concerning the level which they expected crude oil prices to be at in 12 months’ time. 31% predicted that the price would be between $30 and $39, while 26% put the figure at between $40 and $49. 10% of respondents thought the price would fall between $20 and $29.
One respondent said, “It would be no surprise if crude tops $50 in the next 12 months, but anything significantly above that is unlikely.”

Richard Greiner, Moore Stephens Partner, Shipping Industry Group, says: “Shipping continued along its volatile course in the three months to end-February 2016, with the confidence of industry participants reaching the lowest level since our survey was launched in May 2008. This is disappointing and unsurprising in equal measure.

“When the Baltic Dry Index drops to an all-time low it is a real indication of the problems facing the shipping industry. The BDI doesn’t lie, and any doubts about the extent of those problems would have been dispelled over the past three months when reports of the fall in the BDI started to appear in the mass media, which generally carries only bad news insofar as it impacts the shipping industry.

“Most recently, however, there is better news, with the BDI starting to move upwards once more, gaining over 100 points within six weeks of plumbing the depths. Moreover, there is a reasonable expectation that the approaching peak harvest season will bolster demand for ships to carry grain and other commodities on international trade routes. This should boost the BDI further and, while shrinking demand for raw materials from China will continue to have an effect, the world will always need shipping to move its trade staples.

“Overcapacity in any industry will inevitably lead to price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest. Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping’s purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance.

“The simple answer to overcapacity is to reduce the numbers, but ships are too big to hide and disposing of excess units is more difficult in shipping than in most other industries, particularly when there are record numbers of new cabs just waiting to come off the rank. Increased ship recycling is one obvious answer, although current low scrap prices mean that fewer numbers of most tonnage types are being recycled.

“In a climate of continuing overcapacity, increased regulation, ongoing political unrest and economic instability, the shipping industry must find a way to supplement the bread-and-butter of its livelihood – the freight markets. Current indications are not good. The tanker industry may still be reaping a somewhat perverse benefit from low crude oil prices, but that window of opportunity may be starting to show the first signs of closing. Roughly a quarter of respondents to our survey predicted that crude prices would be between $40 and $49 in 12 months’ time which, whilst it would have bought you only just under half a barrel less than two years ago, is more in line with the current price level.

“The dry bulk sector, meanwhile, looks especially troubled, with one respondent to our survey claiming that new historic lows in dry bulk freight rates are being set every day. Reports suggest, however, that more and younger dry bulk vessels are being recycled in spite of weak demolition rates, and contrary to the trend with other categories of tonnage.

“In any industry, the price of a service or product must exceed the cost of providing that service or product in order to achieve a return on investment. In shipping, that is simply not happening at present. Operating costs are going up while freight rates generally are not even keeping pace. Nobody doubts the ability of shipping to bounce back. It has a long history of doing just that. This time, the only question is when.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime 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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 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

Bureau Veritas classes world’s largest specially-built asphalt carrier

Leading classification society Bureau Veritas is classing the 37,000 dwt asphalt carrier Asphalt Splendor, recently delivered to US-based Sargeant Marine. The vessel was built at Avic Dingheng, China and is one of a series of two designed by Chinese design institute SDARI in co-operation with Sargeant.

The hot asphalt can be carried liquid at temperatures up to 170 deg C in sixteen independent tanks with a total capacity of 35,666 cu m.

Philippe Donche-Gay, Executive Vice-President and Head of the Marine & Offshore Division, Bureau Veritas, says, “The high cargo temperatures in asphalt carriers place special demands on structure, construction quality and equipment. Bureau Veritas is a world leader in this sector and currently classes a large number of these ships. The Asphalt Splendor will be a state of the art vessel, with excellent environmental and operational performance. We welcome this project, which builds on our strong relationship with Sargeant Marine”.

Dan Sargeant, President, Sargeant Marine, says, “It is imperative to stay ahead of the game, thinking innovatively when it comes to economics, as well as operations. We are looking forward to the second of these new vessels, also BV classed, which give us a distinct advantage in the marketplace, as there is truly nothing like this out there.”

Key dimensions:

DWT 37,000 tonnes

Length overall: 179.90 m
Breadth: 30.60 m
Depth 16.80 m

Cargo arrangement/systems: 16 independent tanks with a total cargo capacity of 35.666 cu m.

Three cargo pumps 500 cu m/h each

Propulsion plant: 1 x Wartsila 5RT-flex 6.400 kW at 99 rpm

For a picture of the Asphalt Splendor e mail john@merlinco.com

l Bureau Veritas is a world leader in laboratory testing, inspection and certification services. Created in 1828, the Group has more than 66,000 employees in around 1,400 offices and laboratories located all across the globe. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index.

Compartment A, ISIN code FR 0006174348, stock symbol: BVI.

www.bureauveritas.com  for corporate information                              

www.veristar.com   for marine information

For more information:

Carlos Guerrero
Business Development Manager

Oil Tankers & Gas Carriers
Bureau Veritas
 +33 155 24 7235
carlos.guerrero@bureauveritas.com