The latest Shipping Confidence Survey by Moore Stephens has revealed that overall confidence in the market for the next twelve months remains unaffected by the global credit crunch. But two-thirds of shipping interests expect finance costs to rise - a ten per cent increase on levels reported in the last survey, in March 2008 – while there has also been a fall in the number of owners who expect to make a major business investment in the next twelve months.
On a scale of 1 to 10, the overall confidence shown in the market by those who responded to the survey was unchanged at 6.8, with owners and managers expressing the highest levels of confidence at 7.0 (marginally down on the previous survey) against the 6.3 recorded by charterers.
Some respondents acknowledged that the current financial crisis could affect world trade. But this was balanced by the expectation that continuing high demand from Asia and the , in particular, would ensure that shipping would ride out the financial slump. Meanwhile, a shortage of suitably qualified crew – which could ultimately lead to owners being forced to lay up vessels and default on mortgage repayments – and the escalating cost of fuel impacting on the ability to invest in other areas, were recurring themes among respondents.
Demand trends and competition emerged as the factors deemed most likely to influence performance over the next twelve months. Operating costs, which were cited as the most significant factor in this category in the last survey, came in fourth, behind the cost of finance. Comments included doubts about the industry’s ability to build sufficient numbers of new ships to meet demand, and the inability of freight rates to keep pace with the rocketing price of oil.
Owners remained the most likely to make a major investment or significant development during the next twelve months, but their rating of 6.5 out of 10 (against an average overall score of 5.9) was half a point down on the previous survey. Ship managers returned a score of 6.0 in this category, an increase of 0.3 points.
There was a strong message from the survey that finance costs were likely to rise, with 66 per cent of respondents expecting costs to be higher in twelve months’ time than they are at present, as against 56 per cent in the previous survey. There was a sharp increase – from 47 per cent to 71 per cent – in the number of brokers anticipating a higher cost of borrowing, while 70 per cent of managers, and 59 per cent of owners, shared the same expectation. – the largest group overall - was the most pessimistic in this regard, with 68 per cent of respondents from that region anticipating an increase in finance costs.
Opinions about the direction in which freight rates in the tanker market were likely to move over the next twelve months showed some sharp variations, with 64 per cent of charterers expecting rates to increase, and only 31 per cent of owners sharing that view. Similarly, 37 per cent of owners who responded expected tanker rates to be lower, compared to just 9 per cent of charterers. Regionally, Latin America and Asia, with 60 per cent and 56 per cent respectively, led the way in expecting an increase in tanker rates, while in the figure was much lower, at 37 per cent.
In the dry bulk sector, meanwhile, there was evidence of a leveling-out in market expectations, with a 4 per cent increase, to 32 per cent, in the number of respondents who expected rates to be higher in twelve months’ time, and a corresponding fall, from 40 to 35 per cent, in those who were predicting lower rates.
Finally, charterers (50 percent) continued to lead the way in expecting higher rates in the container ship trades over the next twelve months, while only 26 per cent of owners, and 28 per cent of managers, were of the same opinion.