Freights Up, Dollar Down, Markets Lively

January 11, 2005

Writing in Moore Stephens' shipping newsletter, The Bottom Line, Chris Chasty, head of the shipping group, says, "Shipping has had a good year in 2004. Strong demand and a shortage of tonnage across the board has helped everyone to see better returns. Combine that with a rare year free of any high-profile oil spill or a high-profile company crash, and it is easy to enter 2005 with a sense of hope. Even shipping accountants are smiling, when no-one is looking."

But shipping is never plain sailing. To help the industry navigate through the year, Chasty makes some predictions:

"First, freight rates. Of course these will stay strong in most sectors. The US dollar still dominates, even though its global buying power has been falling, and is likely to fall further in the early part of this year. There are those who argue that the process is now beginning by which, in ten years' time, the euro, or the yuan, will have replaced the US dollar as the world's reserve currency. There is an element of risk in that prediction, whether your wager be in dollars, euros or anything else."

Chasty goes on to advise the shipping industry to forget shipping as an investment for now. "Instead, consider spending your positive cashflow on infrastructure. Ports, tank farms, railways, roads, all the areas that shipping feeds into each end. This is where the congestion is, where the demand for investment is, and where you can still get a significant return," he says.

And Chasty advises watching the stock markets carefully. "There will certainly be a high-profile failure of a listed shipping company, or a crash in shipping shares, sometime this year. There doesn't have to be a reason. Stock markets aren't rational," he says.

Like the weather forecasts mariners rely on, Moore Stephens' predictions aren't meant to be taken too literally. But come the end of 2005, they'll give us an idea of where we have come from, which will help us plan for the next period.

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