Confidence growing as opportunity arises

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A continuing rise in confidence levels across the shipping industry is being met by a growing awareness over new opportunities, according to the latest Shipping Confidence Survey from accountant and shipping consultant Moore Stephens.

With average confidence levels expressed by respondents, on a scale of 1 to 10, recorded at 5.7 compared to 5.5 in the previous survey in May 2009, owners, managers, charterers and brokers all exhibited increased confidence in the shipping markets.

“The shipping market has started to pick up this year after the effect of the global economic crises,” noted one respondent, while another commented: “The recovery of the global economy will result in strong demand for tonnage as delayed projects get up and running again.”

A number of respondents acknowledged that the start of a recovery was under way, recognising the current opportunities to purchase vessels at historically low prices. The survey revealed a slight increase in the number of respondents expecting to make a major investment or significant development over the next twelve months, with the overall likelihood of such a development being 5.1 out of 10.0 overall.

A rising awareness of the potential impact of China’s growth on the way the industry conducts its business proved a significant factor of the survey. One respondent noted: “China is now the producer, the consumer, the trader, and the transporter, it has got the cheapest and the most plentiful supply of labour, and it is possibly the richest country in the world. None of these things can be good for the international shipping industry.”

It was also highlighted how China’s influence in the shipping markets is “a risk which has not yet been fully factored in. China will control a lot of cheap new tonnage, with the result that a number of independent ship owners will not have the opportunity to compete.”

Moore Stephens Shipping Partner, Richard Greiner said that although the overall confidence level in the survey is low compared to the first survey in May 2008, “it still represents an increase for the third successive quarter.

“In some ways this mirrors what is happening in the global economy, where there are now very real indications that a recovery is under way, with the likes of France and Germany having recently declared that they have moved out of recession.

“Confidence will return to shipping more slowly than it disappeared. The situation is not helped by the continuing depression in the freight markets, but it should be remembered that today’s rates are often compared to the record highs which the market was enjoying less than two years ago, and this tends to distort the picture,” he revealed.

Of China, Mr Greiner highlighted how the “new and still emerging economic giant represents both an opportunity and a threat for shipping.” He also stressed that “shipping should not despair,” and while “the process of lending has inevitably become more selective, and the terms more onerous, yet there are still banks which are lending money.

“Aspiring borrowers with realistic demands and with well-written, easy-to-understand business plans which plot a clear path to profitability will have the best chance of success,” he added.