The latest Shipping Confidence Survey from international accountant and shipping consultant Moore Stephens records a continuing rise in overall confidence levels in the shipping industry over the past three months.  

It also reveals a growing awareness of the impact which the growth of China may have on the way the industry conducts its business.

The average confidence level expressed by respondents, on a scale of 1 to 10, was 5.7, compared with 5.5 in the previous survey in May 2009.

Owners, managers, charterers and brokers all exhibited increased confidence in connection with the shipping markets in which they operate.

The increase in confidence was most marked among brokers, rising from 4.9 to 5.6. Confidence was up in all major geographic areas with the exception of Asia, where levels remained unchanged from the 5.9 recorded in the previous survey.

A number of respondents acknowledged that the start of a recovery was under way, and also recognised the opportunity which currently exists to buy vessels at historically low prices.

“The shipping market has started to pick up this year after the effect of the global economic crises,” noted one respondent, while another commented: “The recovery of the global economy will result in strong demand for tonnage as delayed projects get up and running again.”

Less optimistic comments included predictions that excessive tonnage oversupply would keep the lid on freight rates, and the catch-all observation: “Hoping for the best, getting ready for the worst.”  

Another respondent warned: “Because two newbuildings are being delivered for every vessel scrapped, the shipping market will not be able to pick up over the next three-to-four years. And it may deteriorate even further, with a number of owners forced into bankruptcy.”

China was a subject on the minds of a number of respondents, one of whom noted, “China is now the producer, the consumer, the trader, and the transporter, it has got the cheapest and the most plentiful supply of labour, and it is possibly the richest country in the world. None of these things can be good for the international shipping industry.”

Another remarked: “China’s influence in the shipping markets is a risk which has not yet been fully factored in. China will control a lot of cheap new tonnage, with the result that a number of independent shipowners will not have the opportunity to compete.”

The survey revealed a slight increase in the number of respondents expecting to make a major investment or significant development over the next twelve months. The overall likelihood of such a development was 5.1 out of 10.0 overall.  

Charterers remained the most confident in this respect, although they, together with managers, actually recorded a drop in their expectation levels compared to the last survey. Owners and brokers, meanwhile, were more confident of making a major investment than they were three months ago.

Geographically speaking, Asia and Latin America led the way in terms of increased confidence in this category, while the levels recorded in the previous survey for Europe and North America were sustained this time around.

For the third survey in succession, respondents identified demand trends as the single most important factor likely to affect their business performance over the coming year, followed by competition and the cost and availability of finance.

There was a one percentage point fall overall, to 45 percent, in the number of respondents who expected finance costs to rise over the coming year. Having recorded a 13 percentage point fall in this category to a level of 41 percent in the previous survey, charterers appear to have had a rethink over the past three months, with the result that 50 percent of them now expect finance costs to rise over the coming year.

A number of respondents made reference to the hard-line attitude adopted by the banks and by other lenders, while one made the succinct observation that, “High finance costs and reduced availability have been the cause of many problems for many owners. Today, if you can buy a ship for cash and let it out to a reliable charterer for, say, two years, at least you are making a return on equity of between ten and 15 percent, which is better than the one percent you will get from the banks.”

Source: Baird Online