Shipping industry confidence holds firm

Jul 06 2018

Shipping confidence held steady in the three months to end-May 2018 according to latest and 10th Confidence Survey undertaken by Moore Stephens.

The average confidence level expressed by respondents was unchanged at the four-year high of 6.4 out of 10 recorded in February this year.


Owners’confidence was also sustained at a four-year high, at 6.6, while managers’ confidence was up from 6.4 to 6.7. The rating for charterers was up to 6.7 from 5 and that of the broking sector was up from 6.1 to 6.3.


This survey was launched in May, 2008 with an overall rating for all respondents of 6.8.


The likelihood of respondents making a major investment or significant development over the next 12 months was down on the previous survey from 5.5 to 5.2 out of a maximum possible score of 10. Confidence was highest among charterers, followed by owners (down from 5.9 to 5.5), managers (down from 5.6 to 5.4) and brokers (down from 4 to 3.5).


The number of respondents who expected finance costs to increase over the coming year was down to 63% from 64% last time. Whereas, in the previous survey, charterers were unanimous in expecting finance costs to increase, just a third were of that opinion this time.


The number of respondents expecting higher freight rates in the tanker sector was up, from 39% to 50%. Net sentiment in the tanker sector was +41.


It is two years since Moore Stephens’ survey reflected any decline in confidence. Net freight rate sentiment was significantly up in all the main tonnage categories. Shipping still has problems to overcome, but it continues to punch above its weight in terms of optimism.


Over the past 10 years, confidence averaged 5.8 out of 10. The low point was the 5 recorded in February, 2016, since when it has only improved or been maintained. The 2010 Greek financial crisis may have been a prime factor in the fall in confidence to 5.3 in August, 2011, but thereafter began a period of fluctuation before a gradual recovery started in 2016, which appears not to have been affected by the birth of Brexit that year.


Over the life of the survey, demand trends have been the factor deemed most likely to affect performance, identified by an average 24% of respondents, followed by competition (20%) and finance costs (16%).


The 10-year averages for operating costs (10%), fuel costs (8%) and crew supply (5%) are today all below the corresponding averages of 12%, 11%, and 11% for May, 2008, due to the effects of the economic downturn and fluctuations in the price of oil.


Ten years ago, regulation was cited by just 2% of respondents as a significant performance-affecting factor. Today it stands at 10% and averages 4% over the decade.


Over the last decade, an average of 48% of respondents have been of the view that finance costs were likely to rise over the coming year. When the survey was launched in 2008, 66% of respondents were of that opinion. By February, 2009, the numbers had dropped to 47% and, by 2015, to 32%. Today, the figure stands at 63%.


Ten-year net sentiment for freight earnings in the tanker sector was +20 in 2008, and averaged +19 over the decade.


This survey reflected the sentiments of a volatile industry in a particularly volatile decade. Significant events included the peak of a boom, a prolonged global financial recession, crises in the banking sector, the collapse of stock markets, the Greek debt crisis, Brexit, and an unprecedented level of government and industry bail-outs. 


Ten years is a long time in shipping, and the past decade has doubtless felt a lot longer still to those industry participants who have lived through it, even those experienced in the peculiar industry cycles.


Confidence may have fluctuated, but it has never collapsed, and portents for the coming decade can reasonably be expected to be better, Moore Stephens concluded.


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