Wednesday, September 19, 2012

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Shipping industry confidence slips to new low

Shipping industry confidence in the three months leading to August 2012 hit the lowest levels in 12 months, according to the global Moore Stephens Shipping Confidence Survey. The figures are on par with the lowest confidence levels recorded since the survey launched in spring 2008.

The company polls key players in international shipping in its targeted online survey. Responses were received from owners, charterers, brokers, advisers, managers and others in the UK and other European countries, the USA, Canada, Russia, China, India, Rest of Asia, Latin America, Africa and Australasia.

The lowered expectations, which come after three consecutive quarters of heightened shipping industry confidence, was prompted by worries about the overcapacity of newbuildings entering the market and the sluggish global economy.

In August 2012, the average confidence level expressed by survey takers in their specific markets was 5.3 on a scale of 1 (low) to 10 (high), compared to the figure of 5.7 recorded in the previous survey in May 2012. The survey was launched in May 2008 with a confidence rating of 6.8.

The likelihood that respondents would make a major investment or significant development over the next year was stable at 5.3. The top factors respondents said were most likely to influence performance over the next year were demand trends, finance costs and competition.

There was a 7-point fall (from 51 percent to 44 percent) in the number of respondents who expected finance costs to increase over the next year.

Once again, charterers, unsurprisingly, differed from owners and managers in their views about rates in the three main categories of tonnage covered by the survey. In the container ship market 32 percent thought rates would increase over the next year. In the tanker sector, 34 percent of respondents thought rates would rise, (down by 6 points); and in the dry bulk sector 34 percent anticipated rate increases.

Moore Stephens shipping partner, Richard Greiner, said, "The fall in confidence recorded in our latest survey is clearly a disappointment. But it cannot really be termed a surprise. In some respects, shipping has been bucking the trend for the past twelve months, exhibiting increased confidence despite the effect on the industry of the political and financial woes in Europe and elsewhere, and the problems of overtonnaging and falling rates.

"Clearly, tonnage supply – both actual and incipient – currently exceeds demand in most trades. Increased scrapping will help, but it will still be necessary to renegotiate commercial arrangements."

Greiner said lower newbuilding costs do nothing to address the tonnage glut, but they provide an opportunity for those with access to cash and a secure level of demand to fill. He said respondents overall thought fuel costs would be less of a performance issue, probably due to the recent decrease in the price of crude.

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