Shipping Industry Confidence Index Hits Record Low

File image credit Paul Benecki / MarEx

By MarEx 2016-03-23 20:21:15

On Wednesday, shipping advisers Moore Stephens reported that overall confidence levels in the industry fell to a record low in the three months ending February 2016, according to the results of the firm's Shipping Confidence Survey.

Overall, respondents reported a confidence level of 5.0 out of 10 for the markets in which they operate, compared with a 5.6 out of 10 in November. It is the lowest rating ever in the survey's eight years of data collection.

Industry's view of conditions was down in all geographic regions, marking a 1.6 point drop in Asia, a 1.0-point drop in North America and a small decrease in Europe.

Among business areas, only brokers reported an increase in confidence (of 0.5 points). All others – especially charterers – were less sanguine in their assessment of the market. Charters' confidence fell by 1.6 points, owners’ by 0.9 points and managers’ by 0.3 points.

Expectations of making a major investment within the coming year fell to 4.8 points, equal to the lowest point recorded, during the heart of the Great Recession in 2009. One participant suggested that further investment is unlikely; already “we are paying for excessive investments over the past five years by speculative funds [representing] the quickest/largest destruction of capital in the shipping world.”

As reflected in the continued unprofitable day rates on the Baltic Dry Index, bulker operations remain an area of particular concern. “No dry bulk business makes any remote sense. There are too many players . . . Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cashflow is coming in,” said one respondent. Others singled out insufficient scrapping activity and low scrap prices as drivers of continued uneconomic bulker rates.

Many executives described a bleak outlook. “As long as shipowners operate based on hope rather than on solid economics, there will always be booms and busts,” said one survey participant. Another forecast that there would be no solid recovery in the near future, writing that “the expected available fleet per metric ton of dry cargo available will be higher at the end of 2016 than it is now. As a result, there is no chance of freight levels improving.”

Tanker operations remained a general exception. Higher day rates driven by increasingly-full onshore storage and low oil prices gave rise to an outlook of cautious optimism among participants.