Confidence slipping in shipping, finds Moore Stephens

2014-09-24

Shipping adviser Moore Stephens has reported a fall in shipping confidence between May and August, with few expecting new investment or improvements in bulk and box freight rates over the next 12 months.

Average confidence on a scale of 1 to 10 decreased from 6.3, recorded in May, to 6.1 in August. While the decrease is something of a return to the mean, after shipping experienced its highest confidence level since 2008 – 6.5 – in February, the results still compare favourably with the 5.9 recorded in August of last year.

While charterer confidence rose to 6.7 from 6.1, a six-year record, and owner confidence increased to 6.2 from 6.1, confidence among managers fell from 6.5 to 6.2, brokers from 6.0 to 5.3, and uncategorised respondents tumbled from 6.7 to 5.9.

The average willingness to make major investments fell from 5.8 to 5.4, its lowest since November 2012, with charterers ranking at 5.5, down from 6.4, managers’ expectations down to 5.6 from 6.2, and owners to 5.6 from 5.8.

Shipping markets were variously described as “poor”, “unpredictable”, “stuck at a level characterised by low income and low expenditure, which now seems to be the norm”, as well as increasingly fraught with “political risks” such as the “intensifying… economic embargoes”.

Despite measures to reduce overtonnaging throughout the industry, a number of respondents cited it as a major problem, which “…continues to have an adverse effect on freight rates”, according to one respondent, while another indicated shipping was experiencing “a period of relative calm before the next wave of eco-design newbuildings starts hitting the water, at which point we can expect a return to choppy conditions,” and another warned of “too much speculative money coming into the market at present, which will lead to an over-supply in due course.”

A more optimistic response read: “Although shipowners still order new vessels in an already oversupplied market, the cash surplus from the last boom is running out and decisions are being taken with greater care and thought, and are usually tied in to specific new projects and requirements. This is likely to slow down deliveries, while scrapping also remains attractive for older and less efficient tonnage.”

Moore Stephens shipping partner Richard Greiner, indicated that the result “…coincides with a deterioration in the political situation in areas of the Middle East and Ukraine.” Other factors were in play, however: “Chief among these, not for the first time, is concern about overtonnaging. There are too many ships to carry the cargoes currently available in certain trades, despite recent efforts to improve the imbalance. As a result, the freight markets are not producing the returns that the industry is looking for. But this must be seen as work in progress. The industry is still recovering from the effects of a prolonged period of global economic downturn.”

Source from : Seatrade Global

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