Survey: Shipping confidence good, higher finance costs anticipated

Survey: Shipping confidence good, higher finance costs anticipated Confidence in the shipping industry remains high despite the global credit crunch, but the majority of shipping interests expect finance costs to rise, according the latest Shipping Confidence Survey by Moore Stephens, a London-based shipping and insurance adviser.
   On a scale of 1 to 10, the overall confidence shown in the market by survey respondents was unchanged at 6.8, with owners and managers expressing the highest levels of confidence at 7 (marginally down on the previous survey) against the 6.3 recorded by charterers.
   Moore Stephens said some respondents acknowledged that the current financial crisis could affect world trade, although this was balanced by the expectation that continuing high demand from Asia would enable shipping to ride out the financial slump.
   Meanwhile, a shortage of 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.
      Demand trends and competition emerged as the factors deemed most likely to influence performance over the next 12 months. Operating costs, which were cited as the most significant factor in this category in the last survey in March, 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.
   Included in the findings was 66 percent expecting finance costs to be higher in 12 months' time than they are at present, against 56 percent in the previous survey. The proportion of brokers anticipating a higher cost of borrowing rose sharply from 47 percent to 71 percent, while 70 percent of managers, and 59 percent of owners, shared the same expectation.
   Owners remained the most likely to make a major investment or significant development during the next 12 months, but their rating of 6.5 out of 10 (against an average overall score of 5.9) was a half-point down on the previous survey. Ship managers returned a score of 6 in this category, an increase of 0.3 points.
   Opinions about the direction in which freight rates in the tanker market were likely to move over the next 12 months showed some sharp variations, with 64 percent of charterers expecting rates to increase, compared to only 31 percent of owners. Similarly, 37 percent of owners who responded expected tanker rates to be lower, compared to just 9 percent of charterers.
   In the dry bulk sector there was evidence of a leveling-out in market expectations, with a 4 percent increase, to 32 percent, in the number of respondents who expected rates to be higher in 12 months' time, and a corresponding fall, from 40 percent to 35 percent, in those who were predicting lower rates.
   Finally, charterers (50 percent) continued to lead the way in expecting higher rates in the containership trades over the next 12 months, while only 26 percent of owners, and 28 percent of managers, were of the same opinion.