Overall confidence levels in all sectors of the shipping industry fell in the three months ended August 2012 to their lowest level for a year, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.
The decline to the lowest figure recorded since the survey was launched in May 2008 comes after three successive quarters of improved confidence. Chief among the concerns raised by respondents to the survey were the glut of new ship orders coming onto the market and continuing uncertainty about the global economy.
In August 2012, the average confidence level expressed by respondents in the markets in which they operate was 5.3 on a scale of 1 (low) to 10 (high), compared with the figure of 5.7 recorded in the previous survey in May 2012, and identical to the figure posted one year previously, in August 2011. The survey was launched in May 2008 with a confidence rating of 6.8.
In the container ship market, there was a 2 percentage point fall overall to 32 percent in the numbers expecting rates to go up. In the previous survey, the number of respondents anticipating higher rates over the coming year was up in all categories of respondent.
This time, it was down in all categories, with the exception of owners and charterers.
The number of container ship charterers predicting higher rates was up to 47 percent (from 41 percent previously) to its highest level since the survey was launched in May 2008 with a corresponding figure of 50 percent. In the case of container ship owners, there was a 2 percentage point increase to 37 percent, but the number of managers expecting improved rates was down by 5 percentage points to 26 percent. Expectations of improved rates were up in Asia (from 28 percent to 30 percent) and in North America (from 39 percent to 41 percent) but down in Europe by 4 percentage points to 34 percent.
Charterers in all sectors were the only category of respondent to report an increase in confidence over the three-month period. Having been the least confident of all categories of respondent in the previous survey, their confidence rating this time of 5.7 (compared to 5.0 in May 2012) was second only to the 5.9 recorded by managers, which itself was down from 6.0 last time. Owners’ confidence was down from 5.6 to 5.1, the lowest rating in the life of the survey for this category of respondent. Brokers also plumbed their all-time low in the survey ratings, with confidence levels down from 5.2 to 5.0 this time. Geographically, confidence in Asia hit a new survey low of 5.4 (down from 5.7 last time), while in Europe it was down from 5.6 to 5.2.
The feelings of large numbers of respondents were succinctly captured by the comments of one in particular, who said, “It is hard to be confident at the moment. Companies are burning up cash reserves at a frightening rate, given the appalling earnings currently on offer. Supply trends are still very negative. Banks are increasingly reluctant to put out any money, let alone new money, except in very specific sectors. The economic outlook, particularly in Europe, is dismal, while China looks increasingly likely to suffer a hard landing. Let’s hope that the darkest hour really is just before the dawn.” Another said, “It is astonishing that a whole industry has been misreading the markets, which has led to the prospect of excess building capacity for years and years to come, based on wrong assumptions by analysts.”
Overcapacity was uppermost in the minds of many respondents, typified by the comment, “The shipping market will remain difficult for the next few years. More owners are now tempted to order new ships as building prices will be at their lowest level for many years. Shipyards and governments will do everything they can to prevent the closure of yards, which will create very interesting special financing packages aimed at getting owners to order new ships. So the market will be flooded with more new vessels, extending the time it will take for the industry to recover.”
The combination of political and economic uncertainty and depressed shipping markets was a dominant theme in many responses to the survey. “The recovery of the shipping industry,” said one respondent, “will depend on the recovery of European economies from financial crises, on the amount of new tonnage coming onto the market, and on the development of China’s import and export markets. The current stagnant situation is unlikely to change within the next twelve months.”
Geographically, demand trends remained the most significant factor for respondents in both Europe (up from 21 percent to 23 percent) and in Asia (down from 24 percent to 21 percent). In Europe, finance costs (unchanged at 19 percent) featured in second place, ahead of competition (down 2 percentage points to 16 percent). In Asia, meanwhile, it was competition which featured in second place, despite being down 2 percentage points to 16 percent, ahead of fuel costs, static at 16 percent.