The average confidence level expressed by respondents in the markets according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens in which they operate was 5.0 on a scale of 1 (low) to 10 (high). This compares to the 5.6 recorded in November 2015, and is the lowest rating in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.
All main categories of respondent with the exception of brokers (up from 4.6 to 5.1) recorded a fall in confidence this time, most notably charterers (down from 5.5 to 3.9), which is the lowest confidence rating by any category of respondent in the history of the survey. Confidence on the part of owners and managers was also down, from 5.7 to 4.8 and from 5.8 to 5.5 respectively.
Geographically, confidence was down in all major areas covered by the survey – in Asia from 6.0 to 4.4, in Europe from 5.4 to 5.1, and in North America from 5.7 to 4.7.
A number of respondents continued to express concern about the level of over tonnaging, with one pointing out, “New building deliveries for 2016 will increase the total fleet by 10.5%, 7% of the current fleet is older than 20 years, and cargo volumes in 2015 were just 4.5% higher than in 2014, so the expected available fleet per metric ton of dry cargo available will be higher at the end of 2016 than it is now. As a result, there is no chance of freight levels improving.” Another respondent said, “As long as shipowners operate based on hope rather than on solid economics, there will always be booms and busts.”
Particular concern was expressed about the state of the dry bulk market wherein no dry bulk business makes any remote sense. There are too many players, too many operators, and too many vessels chasing too few cargoes. Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cashflow is coming in. It is noted, that dry bulk is simply at the bottom level of business.
The need for accelerated demolition states that scrapping activity is far from sufficient to compensate for incoming new tonnage. Low scrapping prices provide little motivation for owners to demolish ships, although increased scrapping may help achieve equilibrium in the dry bulk sector sooner rather than later.
Falling oil prices were also a recurring topic in responses to the survey. Global bulk oil movements will be the key to conditions in the tanker market over the next 12 months. With storage facilities almost full to capacity, there will be nowhere to stock additional supplies unless global economy picks up and oil production is regulated. Meanwhile there is some solace in soft oil prices, as the prices are yet low. The wet markets stand a better chance of remaining profitable on the back of weak crude oil prices. Elsewhere, however, there was concern about the effect of falling oil prices on the offshore maritime sector, There are companies in the offshore shipping market which are under pressure and in potential danger of being shut down.”
Demand trends, competition and tonnage supply featured are the top three factors cited and are likely to influence performance most significantly over the coming 12 months. Demand trends, which were up by two percentage points to 26%, remained in first place, with competition (unchanged at 21%) in second place. Tonnage supply, at 15%, occupied third place, one percentage point ahead of finance costs. Operating costs, up by six percentage points to 12%, featured in fifth place, ahead of fuel costs and regulation at 4%, the latter representing a five percentage-point drop on the figures for November 2015.
Overcapacity in any industry will inevitably lead to price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest. Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping’s purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance.
The simple answer to overcapacity is to reduce the numbers, disposing of excess units is more difficult in shipping than in most other industries, particularly when there are record numbers of new vessels just waiting to be delivered. Increased ship recycling is one obvious answer, although current low scrap prices mean that fewer numbers of most tonnage types are being recycled.
Therefore, in a climate of continuing overcapacity, increased regulation, ongoing political unrest and economic instability, the shipping industry will continue to lower growth in the International Trade given the continued low growth of GDP in the world as compared to the supply remaining high due to existing over capacity coupled with substantial new deliveries of new tonnage and inadequate scrapping of older tonnage.
0 comments:
Post a Comment