Shipping Confidence Plummets to Seven-Year Low


Overall confidence levels in the shipping industry fell during the three months to May 2015 to a level equal to the lowest rating recorded in the past seven years, according to the latest shipping confidence survey from international accountant and shipping adviser, Moore Stephens.

This news comes despite a booming period of growth for the container industry, with the top carriers seeing some of the highest profits they have ever experienced in the last few months.

Respondents complained predominantly about low freight rates and ‘overtonnaging’, while some expressed continuing doubts about private equity funding.

Freight rate volatility has been an issue for some time, with Drewry Shipping Consultants claim that volatility has reached around 40% as a result of overcapacity in the market.

In May, 2015, the average confidence level expressed by respondents in the markets in which they operate was 5.3 on a scale of 1 (low) to 10 (high), down from 5.5 in February, 2015. This equals the lowest figure recorded in the life of the survey, which was launched in May 2008 with a confidence rating of 6.8.

One respondent said: “After eight years of misery, rates must go up if shipping companies are to survive.”

Another said: “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.”

Demand trends, competition and tonnage supply featured as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months.

Richard Greiner, Moore Stephens Partner at Shipping Industry Group, said: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.

“There are no quick fixes for the likes of overtonnaging and low freight rates. The solutions, like the problems themselves, are long-term in nature, and will undoubtedly involve some pain along the way. Moreover, there is not a one-size-fits-all solution for the industry as a whole. What is good news for some sectors is quite the opposite for others.”

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