Second consecutive quarterly rise increases shipping confidence levels
The second successive quarterly rise in 2016 has raised the confidence of the shipping industry and has improved its outlook. During August 2016, respondents expressed their confidence level as 5.4 on a scale of 1(lowest) to 10(highest). This increase is considered to be an improvement when compared to the score 5.1 which was recorded in May 2016 considering that the highest rating was 6.8 recorded in May 2008. The dominant theme of the survey was ‘Overcapacity’.
| Category | Confidence score (August 2016) | Confidence score (May 2016) |
| Owners | 5.3 | 5.7 |
| Charterers | 4.8 | 4.0 |
| Managers | 6.0 | 5.1 |
| Brokers | 4.5 | 4.3 |
From the above table, we can see conclude that there is an average increase in the confidence score among all the categories except the owners where we notice the score decrease by 0.3 points.
| Continent | Confidence score (August 2016) | Confidence score (May 2016) |
| Asia | 5.5 | 5.2 |
| Europe | 5.2 | 5.2 |
| North America | 5.8 | 5.0 |
While considering the geographical confidence level we can notice a vast increase in North America followed by a slight increase in the confidence levels of Asia whereas the levels in Europe remain unchanged.
From this survey it is reported that majority of the respondents were concerned about the global economy and among them one respondent neatly summarized the main issues which are plaguing the shipping industry. He highlighted the following issue “Brexit, Trump, supply overhang, consolidation, demolition, bankruptcies, and the low-risk appetite of banks for shipping and shipping stocks seem to be the main topics to follow for the next 12 months or so. We would be pleasantly surprised if this were to change.” Another expressed “Massive investment, mainly from inexperienced funds and private entrepreneurs, has resulted in an oversupply of funding in some trades.”
The top three factors cited by respondents that are likely to influence the performance in the coming months are demand trends, competition and tonnage supply. It is reported that demand trends increased to 26% from 24%, competition decreased from 23% to 20% while tonnage supply remains unchanged at 16%. The operating costs increased from 10% to 11% ahead of fuel costs and regulations. The net feeling in the market was reported to be -14 whereas it was +26 in the dry bulk industry and +6 in container ships area.
Respondents have posed a question about the barriers women face in the shipping industry, the factors cited were ‘workplace attitude or corporate culture’ by 31%, ‘Travel implications in day-to-day roles’ by 21% and ‘lack of career progression’ by 19%.
Excerpts from Richard Greiner speech:
Richard Greiner, Partner, Shipping & Transport, says, “Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the on-going level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry.”
“Concern persists about too much tonnage and not enough recycling. Restoring the correct balance to tonnage supply and demand is a long-term undertaking, the complexities and diverse nature of which are arguably well captured by the respondent who noted, ‘We have divided interests. For our customers, we hope that nobody orders any vessels for the next 12 months. For us, we hope that people do, because we need new buildings’.”
“Given the pace of technological development, the continuing imperative to improve the industry’s environmental footprint and the exigencies of escalating regulation, the industry will always need new buildings. The trick is to make sure that there is room – and work – for them in a market which encourages responsible competition and allows a sensible margin for profit. That requires, among other things, an increase in ship demolition levels which, given the recent decline in dry bulk recycling and the perceived impossibility of recycling enough container ships, seems unlikely.”
“The maintenance of sensible levels of competition is also a prerequisite for a healthy and profitable shipping industry. Since the survey was launched in 2008, respondents have consistently identified competition as one of the main factors likely to influence their performance most significantly. All trade sectors thrive on responsible competition, which works as an incentive to progress and profitability. But irresponsible competition can have the opposite effect, witness the respondent who referred to ‘those who focus on how to trick, treat and corrupt under the broad term ‘competition’.”
“Perversely, the collapse of Hanjin Shipping Co., which occurred after our survey was concluded, may have a positive effect on over-tonnaging, although nobody would have been looking for such an extreme solution. Hanjin’s collapse has sent shockwaves through the industry which will continue to reverberate for many months to come. It may also give pause for thought to those who see the future of container shipping as ever bigger and more diverse alliances.”
“Equally perverse is the very real possibility that final ratification of the Ballast Water Management Convention may have a positive effect on overcapacity. It might not be correct to say that this development has sent shockwaves through the shipping sector because the industry has known for some time that it has been coming, and has been pondering how best to meet its requirements and how to fund the considerable cost of so doing. It matters not whether it was the ratification by Finland which finished the uncertainty about implementation, or whether it was Panama’s huge fleet which activated the green light. A shock is no less shocking for being expected, and the fact is that the convention will enter into force in September 2017. It will be instructive to see how shipping deals with the issue, and from what level of preparedness, the extent of which will become clearer over the coming months.”
“A stand-alone question in our survey asked respondents to name the biggest barriers to women playing a greater role in today’s shipping industry. More than 65% identified ‘workplace or corporate culture’ as the number one barrier. James Brown famously sang, ‘This is a Man’s World’, although not everybody remembers that the self-styled Godfather of Soul went on to say, “but it wouldn’t be nothing without a woman or a girl’. It is beyond any reasonable measure of doubt that shipping will need the efforts of every man and woman working within the industry today to tackle both current challenges and those which lie in wait.”
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Source: Moore Stephens
