Shipping Confidence Dips in May on Private Equity Worries

Many respondents worried about money flowing from private equity firms

Shipping industry confidence levels fell slightly between February and May 2014, due partly to concerns about private equity funding rushing into the market, Moore Stephens' Shipping Confidence Survey found, according to a report published by industry news site Marine Log.

Moore Stephens shipping partner Richard Greiner said the dip should be put in the context of recent history.

"Confidence is still at its second-highest level for four years, and the number of respondents planning to make a major investment over the next twelve months is as high as it has been at any time since August 2010," he said.

"It is difficult to think of another industry, similarly exposed to political, commercial, economic and environmental pressures, which has retained the confidence of its customers and investors to the same degree."

The average confidence level, on a 1 to 10 scale, dropped to 6.3, from 6.5 in February 2014.

Owners, charterers, and brokers all expressed less confidence than in the previous quarter, although ship managers were slightly more confident.

The portion of respondents citing fuel costs as an issue likely to significantly influence performance rose 1 percentage point to 10 percent.

Greiner said the concern about private equity funding—which he said "dominated the comments of respondents" to an unusual degree—is ironic, given that the firms' entry into the industry represents the willingness of investors to support shipping.

"Many see the growth of private equity finance in shipping as a threat to longer-term viability," he said.

"It is true that this type of funding is likely to be short-term by shipping industry standards, and shipping is an industry which best rewards long-term investors.

"But, in the absence of sufficient bank funding of the type which has been the traditional mainstay of shipping finance over the years, other options are required to bridge the gap."

In the previous Moore Stephens confidence survey, the percentage of respondents citing fuel costs fell slightly.