Shipping industry's future looks tough and messy

Papers presenting two contrasting perspectives of the shipping industry popped up on my screen last week. One was a summary of the Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens. It showed that overall confidence levels in the shipping industry fell to a record low in the three months to February 2016. In a very different vein was a report on the address of Esben Poulsson, president of the Singapore Shipping Association, to the recent CMA shipping conference. Its topic was "Defining the Successful Shipping Enterprise of the Future - What does the industry need to consider in order to be successful in the business tomorrow".

According to Moore Stephens, only brokers appeared to be immune from gloom that has fallen over the industry. Their average confidence level, on a scale of 1 (low) to 10 (high), rose from 4.6 to 5.1. But overall confidence levels in the industry fell from the 5.6 recorded in November 2015 to 5.0, which is the lowest rating in the life of the survey, launched in May 2008 with a rating of 6.8. The big worry in the industry was overtonnaging and the situation was worst in the dry bulk market. One respondent commented: "No dry bulk business makes any remote sense. There are too many players, too many operators, and too many vessels chasing too few cargoes. Most fixtures are concluded merely to keep the banks happy in the belief that some tiny amount of cash flow is coming in."

Moore Stephens shipping industry group partner Richard Greiner said: "Overcapacity in any industry will inevitably lead to price-cutting and eventually to financial difficulties for the weakest, the least well-prepared, or sometimes simply the unluckiest. Shipping has had its share of bankruptcies, foreclosures and restructurings during the past few years, and it is likely that we will see more over the coming months, with negotiations doubtless enlivened by the fact that shipping's purse-strings today are often controlled by an intriguing mix of private equity and traditional shipping finance."