Shipping confidence, notably on the part o[ds_preview]f charterers and managers, improved for the second successive quarter in the three months to end-August 2016, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.
Analyst Richard Greiner says, »Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the ongoing level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry.«
According to the report, concern persists about too much tonnage and not enough recycling. On the other hand, given the pace of technological development, the continuing imperative to improve the industry’s environmental footprint, and the exigencies of escalating regulation, the industry would »always need newbuildings«, Greiner adds. »The trick is to make sure that there is room – and work – for them in a market which encourages responsible competition and allows a sensible margin for profit. That requires, among other things, an increase in ship demolition levels which, given the recent decline in dry bulk recycling and the perceived impossibility of recycling enough container ships, seems unlikely.«
»Perverse is the very real possibility that final ratification of the Ballast Water Management Convention may have a positive effect on overcapacity. It might not be correct to say that this development has sent shockwaves through the shipping sector, because the industry has known for some time that it has been coming, and has been pondering how best to meet its requirements and how to fund the considerable cost of so doing. It will be instructive to see how shipping deals with the issue, and from what level of preparedness, the extent of which will become clearer over the coming months«, the analyst says.
Some of the reported results of the survey are:
- In August 2016, the average confidence level expressed by respondents was 5.4 on a scale of 1 (low) to 10 (high). This is an improvement on the 5.1 recorded in May 2016, and the highest rating for the past nine months of the survey, which was launched in May 2008 with a confidence rating of 6.8.
- Although confidence on the part of owners was down this time from 5.7 to 5.3, charterers (up from 4.0 to 4.8), managers (up from 5.1 to 6.0) and brokers (up from 4.3 to 4.5) were all more optimistic than in May 2016. Geographically, confidence was up in Asia, from 5.2 to 5.5, and in North America from 5.0 to 5.8, with sentiment in Europe unchanged at 5.2.
- Overcapacity was the dominant theme of comments from respondents to the survey. »Scrapping is still not sufficient to cope with newbuilding deliveries and the general supply-side overhang. Every new order will prolong the crisis,« said one, while another noted, »If we all stay away from ordering relatively cheap tonnage today, supply and demand will soon recover.« In the dry bulk market also occupied the thoughts of large numbers of respondents. »Implementation of the Ballast Water Management Convention will most likely solve overcapacity,« said one, »but it will also cause a bloodbath among owners.« Another remarked, »Growth is non-existent, so there is no hope there.«
- The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged on the previous survey, with a rating of 4.9 on a scale of 1 to 10. The confidence of charterers in this respect was up significantly, from 4.1 to 5.0, while brokers also recorded a small increase, from 3.5 to 4.1. Owners and managers, however, were less confident in this regard than they were three months ago, dropping from 5.7 to 4.8 and from 5.4 to 5.3 respectively.
- The number of respondents expecting higher charter rates in the tanker market over the next 12 months was unchanged at 23%, while the numbers anticipating lower tanker rates rose by three percentage points to 37%. Meanwhile, there was a five percentage-point drop, from 43% down to 38% in the numbers of like mind in the dry bulk trades, and a one percentage point increase, to 12%, in the numbers anticipating lower dry bulk rates. In the container ship sector, the number of respondents expecting higher rates was up by one percentage point to 22%, while there was a fall, from 20% to 16%, in the numbers anticipating lower rates.
