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.