April 9 - Overall confidence levels in the shipping industry have risen to their highest levels for fifteen months, according to the latest Shipping Confidence survey by Moore Stephens.
The survey revealed that owners, managers and charterers were all more confident of making a major investment over the next twelve months.
On a scale of 1 to 10, the average confidence level expressed by respondents in the markets in which they operate was 5.9, compared to 5.7 in the previous survey in November 2009, which itself equalled the highest recorded level for twelve months. The overall confidence level achieved in the first Moore Stephens survey in May 2008, meanwhile, was 6.8.
Ship managers expressed the most significant increase in confidence over the latest three-month period, up from 5.8 to 6.2, the highest score recorded by any category of respondent since May 2008. Confidence was also up during the period among owners (from 5.7 to 5.9) and charterers (5.6 to 5.8), while brokers were the only category in which confidence dropped, from 5.7 to 5.5.
A number of responses to the survey exhibited continued confidence in shipping's ability to bounce back in line with the traditionally cyclical nature of the markets, pointing to significant growth trends in emerging Asian, Indian and African markets as a springboard for recovery elsewhere, principally in Europe and North America. But many respondents still exhibited a high level of concern about the state of shipping and the economy in general. One noted, "There are too many ships trading, too many ships delivering, and too many owners stumbling blind into delicate markets, upsetting the fragile status quo that had previously existed".
Another emphasised, "The situation is very unsure. There is too much tonnage and too little finance". One respondent, meanwhile, predicted a slump in the appetite for pure shipowning, pointing out, "More and more vessels will be put out for third party management."
Expectations on the part of respondents of making a major investment or significant development over the next twelve months were up overall to their highest level since May 2008, at 5.3 out of a possible maximum of 10.0. Managers recorded the highest level of expectation, their score rising from 5.0 to 5.7, while charterers and owners also reported increased expectations. The increase was evident across all four main geographic regions, but was most pronounced in Asia, where it rose from 5.0 to 5.6.
Despite this, one respondent said, "The low rates in the market are putting a lot of pressure on owners, some of whom are trying to cancel new tonnage. There are also other casualties involving shipping companies (i.e. Chapter 11 or liquidation). Neither have the banks yet disclosed the full extent of the losses under their shipping portfolios". There was also concern on the part of some respondents that it will be the smaller companies that suffer most as a recovery gets under way. One noted, "The next eighteen months will be the time for people with money. The shipping world will look very different after that. Huge companies will merge, and smaller companies will disappear, making it impossible for newcomers to get started."
For the fifth survey in succession, respondents identified demand trends (27 percent overall) as the single most important factor likely to affect their business performance over the coming year, although it was noticeable that both managers and charterers considered it of less importance than at the time of the previous survey. In their view, competition had assumed increasing importance over the latest three-month period. And it was once again competition (18 percent) and the cost and availability of finance (17 percent) which figured as the two other most significant factors likely to affect the performance of respondents overall. Tonnage supply and operating cost continue to assume increasing importance in the thinking of respondents over the life of the survey to date.
Owners, charterers, managers and brokers all expected finance costs to rise over the next twelve months, the overall figure for all respondents in this regard rising five percentage points from 48 percent to 53 percent.
The full report can be seen here: http://www.moorestephens.co.uk/shipconfidence.aspx