2017 for shipping will be a year of retrenchment rather than improvement, according to what most respondents believed in a regular survey conducted by Moore Stephens, with shipping confidence holding steady in the three months to end-February 2017.
Apart from anticipated job losses, respondents generally felt that competition was running at very high levels, while other familiar concerns included vessel overtonnage and geopolitical uncertainty.
In the three months ended 28 February 2017, the average confidence level expressed by respondents was 5.6 out of 10, unchanged from the previous survey in November 2016, according to international accountant and shipping adviser Moore Stephens.
Owners were the only main category to show an improved level of confidence, up from 5.4 to 5.6. Confidence on the part of charterers was down from its all-time survey high of 6.8 to 5.9, while that of managers fell from 6.4 to 6. Confidence levels in the broking sector, meanwhile, dropped from 5.6 to 4.6.
Confidence was up in Europe and North America, from 5.4 to 5.5 and 5.9 to 6.1 respectively, but down from 5.7 to 5.6 in Asia.
One respondent commented: “If owners can maintain their discipline and resist the blandishments of shipyards desperate for business, there is hope that 2018 will see a return of market equilibrium, in which continued scrapping remains a key element.” Another, meanwhile, noted: “The current state of most shipping markets, coupled with the weakness of banks, means that conditions should be more attractive for alternative lenders.”
Demand trends overtook competition as the factor expected to influence performance most significantly over the next 12 months, followed by finance costs and tonnage supply. “Competition is so intense at the moment that you either accept what is offered or a competitor will take the cargo,” said one respondent.
The number of respondents expecting higher rates in the tanker market over the next 12 months fell by eight percentage points to 25%, while the number anticipating lower tanker rates rose from 24% to 28%.
In the dry bulk sector, there was a three-percentage-point rise to 44% in the numbers anticipating higher rates. One respondent, however, remarked: “The dry bulk freight market will continue to be tough, with returns not much above breakeven.”
In container shipping, the numbers expecting higher rates rose from 27% to 31%, while there was a three-percentage-point fall, to 18%, in those anticipating lower container ship rates.
Richard Greiner, Moore Stephens partner, shipping & transport, said: “The issues facing the industry include an oversupply of ships and insufficient demolition. Freight markets are dragging along the bottom in many sectors, with net rate sentiment in the tanker market being particularly low. Add to this the expectation of higher ship finance costs, the mounting costs of regulation, the threat of cyber-crime and projected increases in operating costs and it is evident that shipping will not be a picnic for the foreseeable future.”