Volatility deflates shipping confidence over freight rate hikes

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balloonsOverall confidence levels in the shipping industry fell in the three months to November 2015, with respondents expressing negative sentiment that freight rates will go up, according to the latest shipping confidence survey of Moore Stephens.

The average confidence level expressed by respondents in the markets in which they operate was 5.6 on a scale of 1 (low) to 10 (high), down from the 5.9 recorded in August 2015. The survey by the UK-based shipping consultancy was launched in May 2008 with a confidence rating of 6.8.

All main categories of respondent recorded a fall in confidence this time, most notably charterers (down from 6.5 to 5.5). Confidence of managers was down from 6.4 to 5.8, that of brokers from 5.2 to 4.6, and that of owners from 5.8 to 5.7.

Geographically, confidence was up in Asia, from 5.8 to 6, but down in Europe from 5.9 to 5.4, and in North America from 6.3 to 5.7.

The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey too, on a scale of 1 to 10, from 5.3 to 5.2. Charterers, managers, and brokers were less confident in this regard than they were three months ago, but the confidence of owners was up, from 5.5 to 5.7.

The number of respondents who expected finance costs to increase over the next 12 months was down by one percentage point on last time, to 47 %. The number of owners anticipating dearer finance fell by 18 percentage points to 35 %, but the number of charterers of like mind rose to 67 %, from 50% previously.

Demand trends, competition, and port congestion featured as the top three factors cited as those likely to influence performance most significantly over the coming 12 months. The numbers were down by four percentage points (to 21%) for competition, which was pushed into second place by demand trends, where there was a one percentage point increase, to 24 %, in the figures.

Port congestion, up 15 percentage points to a new survey high of 17%, featured in third place, followed by finance costs, where there was a four percentage point drop to 14%. Regulation (up five percentage points to 9 %) featured in fifth place, followed by operating costs (down five percentage points to 6 %). Fuel costs featured as a significant factor for just 4% of respondents, compared to a survey high of 16% in May 2011.

There was a fall in the number of respondents anticipating higher freight rates in the tanker, dry bulk, and container ship sectors compared to the figures for August 2015. The net sentiment was nevertheless positive (+7) in the tanker market and in the dry bulk sector (+16), although negative (-5) for container ships.

Shipping partner Richard Greiner said that with shipping nothing but volatile at the moment, “the small drop in industry confidence levels over the three months to end-November is therefore not a great surprise.”

He said denting confidence levels is the global unrest in general, notably the crisis involving Syria, the migrant crisis in Europe, and the Paris bombings.

“Shipping must expect to suffer the downside of such incidents just as, in better times, it can expect to benefit from positive geopolitical changes,” said Greiner.

He added that other inhibitors of shipping confidence include the over-arching problem of excess tonnage. “There are too many ships to carry the available cargoes. Doubts also persist about the level of newbuilding orders at a time when the market does not look to be in a good position to sustain them.”

“This paints a rather austere picture for the immediate future of the industry, which is also facing the burgeoning challenge of funding regulatory compliance with the imminent entry into force of the Ballast Water Management convention.”

But he said there is also good news for the industry. Operating costs fell in both 2013 and 2014, and 50% of those shipowners polled expressed high possibility of making a major investment over the next 12 months. Owners were also much more confident than they were three months ago that ship finance was going to be cheaper over the coming 12 months.

Photo: Rama