Overall confidence levels in the shipping industry fell in the three months to November 2015, according to the latest Shipping Confidence Survey from shipping adviser Moore Stephens.
The average confidence level expressed by respondents in the markets in which they operate was 5.6 on a scale of 1 (low) to 10 (high). This compares to the 5.9 recorded in August 2015. The survey was launched in May 2008 with a confidence rating of 6.8.
Moore Stephens said that all main categories of respondent recorded a fall in confidence this time, most notably charterers (down from 6.5 to 5.5). The confidence of managers was down from 6.4 to 5.8, that of brokers from 5.2 to 4.6, and that of owners from 5.8 to 5.7. Geographically, confidence was up in Asia, from 5.8 to 6.0, but down in Europe from 5.9 to 5.4, and in North America from 6.3 to 5.7.
Many respondents expressed continuing concern about overtonnaging and excess shipbuilding capacity.
One observed, “The over-ordering of ships by investment funds, together with the huge shipbuilding capacity created by China, are not conducive to an orderly market, with the result that shipping investments remain very risky.”
The likelihood of respondents making a major investment or significant development over the next 12 months was feel from 5.3 to 5.2. Charterers, managers and brokers were less confident in this regard than they were three months ago, but the confidence of owners was up, from 5.5 to 5.7.
One respondent said, “A lot of shipowners are like investors in the stock market. Even though common sense tells them they may be making a bad investment, they would rather take the risk than miss out on a possible upturn in the market.” Yet another respondent said, “Smart owners wait until rates are low and buy used ships at low prices.”
The number of respondents who expected finance costs to increase over the next 12 months was down by one percentage point on last time, to 47 %. The number of owners anticipating dearer finance fell by 18 percentage points to 35 %, but the number of charterers of like mind rose to 67 %, from 50 % previously.
Demand trends, competition and port congestion featured as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months.
The numbers were down by four percentage points (to 21 %) for competition, which was pushed into second place by demand trends, where there was a one percentage point increase, to 24 %, in the figures.
Port congestion, up 15 percentage points to a new survey high of 17 %, featured in third place, followed by finance costs, in respect of which there was a four percentage point drop to 14 %.
Regulation (up five percentage points to 9 %) featured in fifth place, followed by operating costs (down five percentage points to 6 %). Fuel costs featured as a significant factor for just 4 % of respondents, compared to a survey high of 16 % in May 2011.
There was a fall in the number of respondents anticipating higher freight rates in the tanker, dry bulk and container ship sectors compared to the figures for August 2015. The net sentiment was nevertheless positive (+7) in the tanker market and in the dry bulk sector (+16), although negative (-5) for container ships.
Moore Stephens shipping partner Richard Greiner says, “Global unrest in general, and in particular the crisis involving Syria, does nothing to help confidence in industries such as shipping, which operate across international borders. Neither does the migrant crisis in Europe, which has escalated significantly in recent months, nor the Paris bombings. Shipping must expect to suffer the downside of such incidents just as, in better times, it can expect to benefit from positive geopolitical changes.”
With respect to the issues of oversupply Greiner believes that only increased ship recycling and rationalisation of business plans can effectively address these issues.
“The tanker market is producing comparatively good earnings at the moment, but its fortunes are too closely linked to the price of oil for anybody to accurately predict how long this will last. Expectations of improved rates over the next 12 months in the three main tonnage categories covered by the survey are down. In the case of the dry bulk sector, such expectations are at their lowest since August 2012, while in the container ship market one has to go back to October 2008 to find a lower figure. Indeed, our respondents recorded an overall negative sentiment in respect of the container ship market,” he adds.
“This paints a rather austere picture for the immediate future of the industry, which is also facing the burgeoning challenge of funding regulatory compliance with the imminent entry into force of the Ballast Water Management convention. But it is by no means all bad news. Operating costs fell in both 2013 and 2014, which is evidence of the application of a measure of control which shipping has not been accustomed to seeing in recent years,” Greiner went on to say.
“ The outlook remains volatile, but exciting.”