Low freight rates and overtonnaging dimmed the overall confidence of shipping stakeholders during the three months to May 2015 to a level equal to the lowest rating recorded in the past seven years, according to a new study by Moore Stephens.
In May, the average confidence of respondents in the markets where they operate was 5.3 on a scale of 1 (low) to 10 (high), down from 5.5 in February 2015, based on the outcome of the latest shipping confidence survey conducted by the London-based maritime consultancy.
This equals the lowest figure recorded in the life of the survey, previously reached in August 2011 and August 2012, said the report.
Charterers were the only respondent category to record an increase in confidence, although from the all-time survey low last time of 3.9. But their rating of 4.2 was still the lowest in the latest survey. The confidence of owners was down from 5.4 to 5.1, that for managers from 6.2 to 6.1, and that for brokers from 5 to 4.8.
Geographically, confidence was down in all main areas covered in the survey, with the exception of North America, where it showed a marginal increase from 5.9 to 6.
A number of respondents expressed the view that an upturn in market conditions was some way off.
The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey, on a scale of 1 to 10, from 5.1 to 5, the lowest figure since the 4.9 recorded in February 2012.
The number of respondents who expected finance costs to increase over the next 12 months was up by eight percentage points, from the lowest figure in the seven-year life of the survey, to 40 percent.
Demand trends, competition, and tonnage supply featured as the top three factors cited by respondents as likely to influence performance most significantly over the coming 12 months.
On freight markets, there was a fall in the number of respondents anticipating higher rates in the dry bulk sector, but expectations of improved rates in the tanker and container ship trades were up on the figures for February 2015. Overall net sentiment was positive in all three main tonnage categories covered by the survey.
Richard Greiner said: “The fact that shipping confidence has revisited the low point recorded twice before in the seven-year life of the survey underlines both the current volatility of the markets and the fragile nature of confidence itself in an industry where, little more than twelve months ago, it was at an all-time high.”
He added that solutions would take time to take effect and that their benefits would not be equally shared.
“There are no quick fixes for the likes of overtonnaging and low freight rates. The solutions, like the problems themselves, are long term in nature, and will undoubtedly involve some pain along the way. Moreover, there is not a one-size-fits-all solution for the industry as a whole. What is good news for some sectors is quite the opposite for others.”
But Greiner believes there are some good developments, too. “The Baltic Dry Index (BDI) has started to nudge upwards after an extended period in freefall. The tonnage supply-demand imbalance, although still unsatisfactory, is improving rather than deteriorating. There will always be a demand for shipping.”
Moreover, given the high operating and regulatory costs as well as the exit of many weaker companies, Greiner said the shipping industry “is likely to be stronger than it has been for many years once the recovery does get under way.”
Photo: Muhammad Mahdi Karim
