Moore Stephens Survey Shows Confidence Boost in Shipping Industry

by | Thursday, April 10, 2014 | 0 comment(s)

In the three-month period through February of this year, confidence levels in the shipping industry have risen to their highest level in six years, according to a Shipping Confidence Survey published by Moore Stephens.

The average confidence level in February, as expressed by respondents, was 6.5 on a 10-point scale, in comparison to 6.1 in the previous survey from last November. This level is the highest since 2008, when a level of 6.8 was recorded in May.

Improvement was recorded across all categories.Confidence of owners was up to 6.6 from 6.2, and the rating for charterers was the highest in the history of the survey at 6.5.Managers’ rating rose to 6.4, and brokers’ rating was also up to 6.4, an improvement from 5.6. These improvements were seen in Europe, Asia, and North America.

This improvement in confidence is not without an awareness of the challenges still faced by the industry as a whole. According to one respondent, “There are signs that we have passed the deepest point of the recession. The only question now is how long it will take for the markets to improve to the point where we have sustainable rates again. It may be that some ship owners will still not make it because time – or cash and the patience of the banks – will run out.”

Some respondents, however, did not see the growth of equity funding in shipping as a positive step. Said one respondent, “The over-supply of tonnage, together with private equity investment, will continue to depress rates and delay recovery.”

With regard to the likelihood of respondents making a significant development or investment in the next year, that number was materially unchanged since November’s survey, remaining at 5.8, which is the highest since August of 2010.

Competition, finance costs, and demand trends were the top three factors respondents cited as those most likely to have an effect on performance in the next year. The overall rating for demand trends had dropped by two percent for the third quarter in a row, and competition was the same at 19 percent. Many respondents cited the escalating fuel cost as a major performance-affecting factor. Said one respondent, “Fuel prices are a deterrent. Freight rates have increased, but fuel prices eat into time-charter equivalents.”

In the freight market, the expectation of higher rates in tanker trades remained the same; however, there was a rise in the level of optimism regarding rate increases in the container ship and dry bulk sectors.

According to Moore Stephens shipping partner, Richard Greiner:

Six years is a long time in shipping. Indeed, based on empirical evidence, it is long enough to qualify as a cycle in what is an historically cyclical industry. It is perhaps too soon to say that we have reached the end of the most recent downward cycle, but it seems that the worst may be over. This latest survey finds confidence in shipping at its highest level since 2008, with genuine prospects for further improvement over the next twelve-to-eighteen months.

The outlook in all the major freight markets is brighter than at any time in recent memory, not least because some of the fears about over-tonnaging have been eased by increased scrapping and by a more pragmatic approach, albeit one dictated by necessity, to business expansion. Despite continuing difficulties in certain part of the world, some of the volatility has been taken out of the global economic and political crises which have characterized the passage of the past few years. That is good for trade and good for shipping.

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