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Moore Stephens shipping confidence survey hits all-time-low

Moore Stephens shipping confidence survey hits all-time-low
Confidence in shipping has hit its lowest point since the financial crisis, according to a Moore Stephens survey.

The average confidence level in May 2015, 5.3 on a scale of 1 to 10, is the lowest ever recorded by the survey, which began in May 2008, then at 6.8.

One respondent explained: “Boom / bust cycles in the shipping industry usually last about seven years, which is sufficient time for any money lost to return to the market, with interest rates at, say, 6%. But now, because of excess liquidity in the markets and low interest rates, there is a feeling that any recovery will be a very long time coming.”

Overtonnaging was high on the list of concerns, with 15% of respondents voting it one of the top three factors likely to most significantly influence performance over the coming 12 months. “For as long as there is no correction in the availability of shipbuilding capacity, and for as long as outside money keeps coming in, there is no hope of an improvement in the shipping industry,” said one respondent.

Meanwhile other indicators, demand trends and competition, decreased by 1%, to 23% and 20% respectively. One respondent said: “Only the big owners can make investments in order to be ready with good tonnage, and not be displaced by competitors, when the market recovers.” 

Dry bulk was particularly prominent in the survey results. “The remarkable acceleration of scrapping of larger bulk carriers and the conversion of many newbuildings into tankers will have a positive effect on the dry bulk market sooner than had previously been anticipated - provided, of course, that suicidal private equity has learnt its lesson and accepts that this is not an opportunity to make a quick fortune.”

“The fact that shipping confidence has revisited the low point recorded twice before in the seven-year life of the survey underlines both the current volatility of the markets and the fragile nature of confidence itself in an industry where, little more than 12 months ago, it was at an all-time high,” said Moore Stephens Shipping Industry Group partner, Richard Greiner.

“Shipping has enough problems to occupy itself for the foreseeable future. But it must not take its eye off the ball when it comes to the incipient costs associated with achieving regulatory compliance, or indeed of properly managing the increasing risks which it faces on a daily basis, encompassing everything from the financial stability of counter-parties to cyber security threats.

“It is not all bad news. The Baltic Dry Index (BDI) has started to nudge upwards after an extended period in freefall. The tonnage supply / demand imbalance, although still unsatisfactory, is improving rather than deteriorating. There will always be a demand for shipping. Moreover, given the high operating and regulatory costs involved, and the fact that the economic and industry downturn has already claimed significant numbers of weaker companies, the shipping industry is likely to be stronger than it has been for many years once the recovery does get under way. In the meantime, it is just a question of holding one’s nerve.”