Moore Stephens: Shipping Confidence Down in the Dumps

Overall confidence levels in the shipping industry fell to a record low in the three months to February 2016, 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 5.0 on a scale of 1 (low) to 10 (high). This compares to the 5.6 recorded in November 2015, and is the lowest rating in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.

All main categories of respondent with the exception of brokers (up from 4.6 to 5.1) recorded a fall in confidence this time, most notably charterers (down from 5.5 to 3.9), which is the lowest confidence rating by any category of respondent in the history of the survey. Confidence on the part of owners and managers was also down, from 5.7 to 4.8 and from 5.8 to 5.5 respectively.

Geographically, confidence was down in all major areas covered by the survey – in Asia from 6.0 to 4.4, in Europe from 5.4 to 5.1, and in North America from 5.7 to 4.7.

A number of respondents continued to express concern about the level of overtonnaging, with one pointing out,

“Newbuilding deliveries for 2016 will increase the total fleet by 10.5%, 7% of the current fleet is older than 20 years, and cargo volumes in 2015 were just 4.5% higher than in 2014, so the expected available fleet per metric ton of dry cargo available will be higher at the end of 2016 than it is now. As a result, there is no chance of freight levels improving.” 

Particular concern was expressed about the state of the dry bulk market, with one respondent commenting,

“No dry bulk business makes any remote sense. There are too many players, too many operators, and too many vessels chasing too few cargoes. Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cashflow is coming in.”

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 5.2 to 4.8, also a record low.

On the other hand, there was a 16 percentage-point increase in the number of respondents anticipating lower freight rates in the tanker markets. But there was a small increase in the number of respondents anticipating higher rates in the dry bulk and container ship sectors, compared to the figures for November 2015. The net sentiment in the tanker market was -23, but +22 and +8 in the dry bulk and container ship sectors respectively, the survey shows.

“ The tanker industry may still be reaping a somewhat perverse benefit from low crude oil prices, but that window of opportunity may be starting to show the first signs of closing. Roughly a quarter of respondents to our survey predicted that crude prices would be between USD 40 and USD 49 in 12 months’ time which, whilst it would have bought you only just under half a barrel less than two years ago, is more in line with the current price level,” says Richard Greiner, Moore Stephens Partner, Shipping Industry Group.

“Overcapacity in any industry will inevitably lead to price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest. Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping’s purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance,” he adds.

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