International accountant and shipping adviser Moore Stephens has said that it expects the shipping industry to remain volatile in 2016.
Moore Stephens Shipping artner Richard Greiner said: “The ultimate definition of an optimist has been characterised as an accordion player with an answerphone. Such extreme optimism might be difficult to find in shipping today, but the portents for 2016 are not all bad.
“The Baltic Dry Index, a measure of shipping rates for everything from pins to elephants, dropped to an all-time low in December, 2015, and has fallen still further this month.
“Most people blamed this on China for not consuming as much of anything as it did previously. Nevertheless, the dry bulk sector will probably have to reduce the newbuilding orderbook and increase ship recycling in 2016 in order to restore the balance.
“The same is true of the container ship sector, where reducing capacity is seen as the best way to drive up rates. CMA CGM's move to buy NOL, meanwhile, although subject to regulatory approval, is an indication of further consolidation. It would be no surprise to see more still in 2016.
“Shipping will remain volatile and uncertain throughout 2016. Operating costs will go up, as will the cost of regulation – for example, implementation of the Ballast Water Management Convention. The threat from cyber security will rise.”
Confidence in the shipping industry has been waning for some time, with the Baltic Dry Index dropping by more than 700 points in December.
Container shipping lines are now looking at consolidating their business activities and cutting capacity on routes to cope with the slump in demand caused by low freight rates.