Low Bunker Prices Bring Mixed Fortunes as Shipping Industry Confidence Crashes to Equal All Time Low

Moore Stephens' Shipping Industry Confidence is equal to its all time low

The now familiar story of low freight rates and overtonnaging are behind a slide in shipping industry confidence levels to equal the current record low, but low bunker prices are offering mixed blessings, Moore Stephens reports.

In its latest Shipping Confidence Survey, the London-based accounting company and consultancy pegged the confidence level of respondents on a 1 to 10 scale at 5.3, the lowest figure recorded since the survey was launched in 2008, and equal to the lowest figure recorded that was previously reached in August 2011 and August 2012.

The 4.2 confidence level of charterers was the only increase of any category of respondents, up from 3.9, but it was still the lowest number in the survey, which reported decreased confidence levels in owners, managers, and brokers compared to previous surveys.

Richard Greiner, shipping partner for Moore Stephens, said that "The fact that shipping confidence has revisited the low point recorded twice before in the seven-year life of the survey underlines both the current volatility of the markets and the fragile nature of confidence itself in an industry where, little more than twelve months ago, it was at an all-time high."

A score of 5.0 - the lowest score since February 2012 - was recorded from respondents being asked if they would make a major investment or undertake significant development over the next 12 months.

By contrast, the number of respondents expecting finance costs to increase over the next twelve months shot up by eight percentage points to 40 percent from the lowest figure in the seven-year life of the survey.

A fall in the number of respondents anticipating higher rates in the dry bulk sector was also recorded - little surprise given the terrible start to 2015, and grim outlook, the sector faces. 

Greiner noted that good news for some sectors is bad for others.

"Lower oil prices might be helping smaller operators to compete by virtue of reduced bunker costs, but in many respects they are bad news for the bigger players with whom they are competing," he said.

However, he pointed out that the Baltic Dry Index (BDI) "has started to nudge upwards after an extended period in freefall, [and] the tonnage supply/demand imbalance, although still unsatisfactory, is improving rather than deteriorating."

Greiner concludes that the shipping industry "is likely to be stronger than it has been for many years once the recovery does get under way."

Earlier this year Greiner urged the shipping industry to adopt a can-do attitude and said it needs to "accept the things it cannot change, to change the things it can change, and to make sure it understands the difference between the two."