Shipping Industry Confidence at Highest Point Since 2008

Responses were mixed on the impact of private equity cash flowing into the industry

In the three months ended this February, confidence levels in the shipping industry hit their highest level since 2008, Moore Stephens found in its quarterly Shipping Confidence Survey.

Some respondents cited rising fuel costs as a factor in their companies' performance.

"Fuel prices are a deterrent," one said.

"Freight rates have increased, but fuel prices eat into time-charter equivalents."

However, the percentage of respondents pointing to fuel costs as a major factor in their performance fell to 9 percent, with more people citing demand trends, competition, finance costs, tonnage supply, and operating costs.

Among charterers, fuel cost was the third most significant factor after demand trends and tonnage supply, cited by 18 percent of respondents.

Overall, respondents put their confidence in the markets where they operate at a 6.5 on a scale of 1 to 10, up from 6.1 in the previous quarter.

The confidence was the highest since the survey launched in 2008 with a reading of 6.8.

"There are signs that we have passed the deepest point of the recession," one respondent said.

"The only question now is how long it will take for the markets to improve to the point where we have sustainable rates again.

A number of respondents pointed to new private equity funding for shipping as a sign of the industry's improving health, but some warned that the extra money could result in greater problems with excess tonnage.

"Private equity investment is ruining any hope the markets had of better days," one person said.

"The shipping markets are changing structurally, with far too many new 'finance experts' who think they know shipping better than the shipping experts do.

"Stand by for a race to the bottom, followed by a long period of below-average returns."

Niels G. Stolt-Nielsen, CEO of chemical tanker company Stolt-Nielsen said last week that private equity is encouraging excessive ship building and could ultimately hurt the industry.