2013 Will Be Another Tough Year for Shipping

by Ship & Bunker News Team
Wednesday January 9, 2013

Banks will gain more control over the shipping industry while vessel values decline and regulatory costs rise in 2013, United Kingdom-based shipping consultant and accounting firm Moore Stephens is predicting.

Fuel and other operating costs will rise, but revenues will not follow suit, forcing shipping companies to absorb the extra expenses, according to Moore Stephens partner Julian Wilkinson.

"For shipping in 2012, it was not so much a case of 'Crisis, What Crisis?' as 'Crisis, Which Crisis?'" he said.

"This year will be equally challenging."

Wilkinson added that worsening debt-to-equity ratios will give banks more control over the industry and lead to restructuring, deferred payment, impairment, and provision.

"Openness and the avoidance of unnecessary delay will be key elements to successful financial restructuring," he said.

"Even if there really are cash-rich banks in China prepared to underwrite shipping deals, nobody is waiting for them to start lending before planning their next move."

Moore Stephens also predicted further acceleration of scrapping, even as more newbuilding deliveries keep shipping capacity high, putting pressure on rates.

"The fact remains that now is a good time to build eco-friendly ships at reasonable prices for which there will be strong demand in the future," Wilkinson said.

He also said the cost of regulatory compliance, including preparing for new ballast water rules, will be high.

"Owners need to be thinking now about where the money for retrofitting - and it is a lot of money - is coming from," he said.

Despite all the difficult conditions, Wilkinson said, "remarkably, the Moore Stephens Shipping Confidence Survey shows that the industry closed 2012 more confident than it ended 2011.

"New investors, or existing stakeholders embarking on new projects, will be putting money into a leaner and greener industry than the one which was making good money before the economic gloom kicked in."

Other recent analyses by Clarkson Plc. and Bloomberg News have also predicted a difficult year for the shipping industry.