Industry ‘will rebound over the next 12 months’

While overall confidence levels in the shipping industry may have declined by more over the past 12 months, things are likely to improve over the coming 12 months and beyond according to respondents to the latest Shipping Confidence Survey compiled by international accountant and shipping consultant Moore Stephens.

Recorded comments ranged from, “as owners we have already touched the bottom, and I don’t believe we can go any lower”, to “we are quite confident that there will continue to be good business opportunities in the months ahead, and perhaps this is a good time to enter the market from the point of view of investment”. Other comments included, “In 12 months’ time, the market will have factored in most of the bad news and market confidence will start to return, led by the US, Europe and Asia”, and “Shipping will start an upward trend in the third quarter”.

The survey also confirmed that there are winners in every downturn. One respondent observed that, “given what is happening with some Chinese yards at present, it would be no surprise to find that some builders may become owners and start operating the vessels they build”. Another observed, “We expect some real opportunities in terms of low-price, quality vessels,” while yet another said, “Cash-rich buyers will be looking at the bargains of the millennium come the summer.”

There was also evidence that the economic downturn has caused particular problems for a number of operators. One respondent noted, “The biggest problem for us today, and probably for the next six to nine months, is counter-party risk. Every time one operator goes bust it has a domino effect on everyone else.” And while some respondents felt that the economic crisis would force a lot of substandard operators out of the market, others were worried about “unhealthy competition in all sectors, because everybody is looking for cashflow”.

The survey also revealed a fall over the 12-month period – from 5.9 to 4.8 – in the number of respondents who expect to make a major investment or significant development over the next 12 months. Charterers continue to be the most likely at 5.6, followed closely by owners at 5.5.

Over the past year, the perception of those factors which most influence performance have changed significantly. One year ago, it was ship operating costs, crew supply and tonnage supply that led the way among respondents. In the latest survey, demand trends (27 per cent), the cost and availability of finance (21 per cent), and competition (20 per cent) have now emerged as the three factors deemed most likely to influence performance over the coming year. TST