Overall confidence levels in the shipping industry fell slightly during the three months to August 2014 from May 2014, but were still higher than at the corresponding period 12 months ago, and confidence among charterers actually reached a six-year high, according to the latest shipping confidence survey conducted by consultancy service provider Moore Stephens.
In August 2014, the average confidence level expressed by respondents was 6.1 on a scale of 1 (low) to 10 (high), down from the 6.3 recorded in May 2014. This compares to the 5.9 recorded in August 2013, and to the record high of 6.8 when the survey was launched in May 2008.
Charterers expressed a significant increase in confidence this time, up from 6.1 to 6.7. Owners (up from 6.1 to 6.2) were also more confident. But confidence among managers and brokers was down, from 6.5 to 6.2 and from 6 to 5.3, respectively. The biggest fall in confidence was actually expressed by uncategorized respondents (down from 6.7 to 5.9).
Geographically, confidence was down in all main areas surveyed. In Asia, the fall was from 6.4 to 6, in Europe from 6.2 to 6.1, and in North America from 6.5 to 6.2.
A number of respondents referred to the adverse effect which political and economic developments are having on the market, noting the weak global economy, the unpredictable shipping markets, and increasing political risks.
Once again, the dominating concern among respondents was the perceived adverse effect on the market of an excessive amount of tonnage, said the report.
Despite evidence to suggest that measures to reduce overtonnaging in the industry are meeting with some success, a number of respondents warned that there were still too many ships—both in service and on order—for the cargoes available.
Expectations on new investments
The amount of anticipated new investment over the next 12 months was down over the three-month period of June-August.
The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey of March to May, on a scale of 1 to 10, from 5.8 to 5.4, the lowest figure recorded since November 2012. Charterers rated the prospect of new investment at just 5.5, as opposed to 6.4 three months ago. Managers’ expectations, meanwhile, were down from 6.2 to 5.6, while owners recorded a drop from 5.8 to 5.6.
Geographically, expectation levels of major investments were down in Asia, from 5.9 to 5.2 (the lowest figure since May 2012), in Europe, from 5.7 to 5.4, and from 5.9 to 5.6 in North America.
Key performance factors
Like in the last survey, demand trends, competition, and finance costs, in that order, once again featured as the top three factors cited by respondents overall as those likely to influence performance most significantly over the coming 12 months.
Demand trends remained the number one performance-affecting factor for owners. Tonnage supply and competition featured in equal second place.
For managers, meanwhile, competition remained in first place, followed by finance costs, and demand trends. For charterers, demand trends remained in first place, ahead of competition and tonnage supply.
Geographically, demand trends were the most significant factor for respondents in Europe and North America, but in Asia it was competition which topped the list, ahead of demand trends).
Competition was the second most significant performance-affecting factor in Europe and in North America. In both Europe and Asia, tonnage supply featured in third position, while in North America it was finance costs (which occupied third place.
Freight rate expectations
Turning to freight markets, there was a fall in the number of respondents anticipating higher rates in the container ship trades from last time.
The number of respondents expecting rates to increase over the coming 12 months was down by 3 percentage points to 31 percent. All respondents, with the exception of owners, were less confident of rate increases this time than they were three months ago.
Geographically, expectations of improved container ship rates were down in Asia, from 38 percent to 32 percent, but up by 2 percentage points in Europe to 34 percent.
Shipping partner Richard Greiner said, “The slight decrease in confidence recorded over the three-month period covered by the survey coincides with a deterioration in the political situation in areas of the Middle East and Ukraine. Shipping operates on a global stage, and must inevitably be affected by international events.”
At the same time, however, Greiner said survey results showed that other factors have also helped to undermine confidence, foremost of which is concern about overtonnaging.
“There are too many ships to carry the cargoes currently available in certain trades, despite recent efforts to improve the imbalance. As a result, the freight markets are not producing the returns that the industry is looking for. But this must be seen as work in progress. The industry is still recovering from the effects of a prolonged period of global economic downturn.”
Other continuing causes of concern include operating costs and the bill for achieving regulatory compliance.
Said Greiner: “Overall, confidence in shipping is higher than it was twelve months ago. It continues to attract investors both from within and outside the industry. Moreover, both charterers and owners, the prime movers who make the industry go round, are more confident now than they were in the previous survey. The peaks reached by the freight markets in the mid-2000s may not be achievable for the foreseeable future, but today’s industry has moved out of foothill territory and has reason to be looking up, rather than down.”
Photo: Noebu
