Despite Eurozone fears, shipping confidence picks up for Q3
December 20, 2011
Overall confidence and the likelihood of major new investment in shipping picked up marginally in Q3, according to the latest Shipping Confidence Survey from accountant and shipping adviser Moore Stephens.
Respondents to the survey also continued to exhibit a high level of concern about the negative impact of overtonnaging on the market amid continuing fears about the global economic climate, and the eurozone crisis in particular.
In November, the average confidence level was 5.4 on a scale of 1 (low) to 10 (high), up on the 5.3 recorded in August. But, together with the February 2009 figure, it remains the second lowest confidence rating since the survey was launched in May 2008 with a rating of 6.8.
Confidence among owners was up from 5.1 to 5.3, but down on the part of charterers, from 5.0 to 4.9. There was a small increase in confidence in the broking sector, from 5.1 to 5.2. Confidence was highest among managers, unchanged at 5.6. Europe, up from 5.0 to 5.1, was the least confident region. In May 2008, European confidence stood at a high of 6.6, and as recently as August 2010 was running at 6.1. Confidence in Asia rose from 5.7 to 5.8 and in North America from 5.1 to 5.8.
The eurozone crisis featured prominently in comments from respondents.
“Above everything,” said one, “it is the European financial crisis which will decide how things turn out for shipping in general and for shipowners in particular.”
State intervention was also foreseen by another respondent who noted: “The supply overhang in almost all sectors remains a serious challenge despite slippage and cancellations. Cancelled newbuildings will still be built, especially in China, where they will simply be owned by state-supported yards and operators and will therefore continue to add to the level of over-supply. Ship finance will be available to only a few, financially strong companies.”
A number of respondents took a pessimistic view of how long it might take for shipping to turn the corner.
“It is now more likely than ever that shipping will remain depressed for the next three years, with only marginal improvements thereafter over the next five years.”
Admitting that some of its ships were only breaking even while others were operating at a loss, leading to vessel sales and redundancies, one respondent said: “We do not expect the market to recover for at least another three or four years.”
The threat posed by overtonnaging was very much on the minds of respondents. “After 30 years in shipping, I believe the summer of 2012 will be the worst I have experienced,” said one respondent. “The oversupply of tonnage bought at inflated prices, combined with turmoil in north European manufacturing, will mean that shipping companies, brokers and owners not involved in the transport of food products are going to be the hardest hit.”
Despite these gloomy predictions, respondents overall were more optimistic of making a major investment or significant development over the next 12 months. On a scale of 1 to 10, the likelihood of such a development rose to 5.2 from 5.1 in the last survey.
So far as expectations of rate increases in the markets were concerned, it was a case of down, down, down in all main tonnage categories from owners and managers in all geographic areas covered by the survey.
For the first time since February 2009, the number of respondents overall expecting a decline in containership rates was higher than the number anticipating rate increases.
Overall, just 23% of respondents (compared to 28% last time) expected rates to go up, the second-lowest figure since the survey began, behind only the 20% recorded in October 2008. Meanwhile, 31% thought that rates would go down, the highest figure since the 36% recorded in February 2009. The number of charterers expecting rates to increase fell from 30% in August this year to just 13% this time, while the figures for owners and managers were also down, from 25% to 23%, and from 31% to 23%, respectively.
Moore Stephens shipping partner Richard Greiner says: “It says a great deal for the resilience of the shipping industry that, despite the problems facing the sector, and notwithstanding the acute difficulties bedevilling the world economy, our survey showed a small increase in confidence.
“Like a boxer who refuses to lie down, shipping is fighting to ride the punches and to bounce back off the ropes.”
Courtesy of IFW
