Shipping confidence reached its equal highest rating in the past three years in the three months to end-May 2017, according to the latest Shipping Confidence Survey from Moore Stephens.
The average confidence level expressed by respondents to the survey was up to 6.1 out of 10.0 from the 5.6 recorded in the previous survey in February 2017. Increased confidence was recorded by all main categories of respondent to the survey, which launched in May 2008 with an overall confidence rating of 6.8.
In the case of brokers, the confidence rating rose from 4.6 to 6.4, while for owners the increase was from 5.6 to 6.1. Confidence on the part of charterers and managers, meanwhile, was up from 5.9 to 6.4, and from 6.0 to 6.2 respectively. Confidence levels were unchanged in Asia at 5.6, but up in Europe, from 5.5 to 6.2, and in North America, from 6.1 to 6.4.
A number of respondents expressed cautious optimism about the industry's fortunes over the next 12 months, based largely on perceived increased levels of ship demolition and a rationalisation of over-ambitious newbuilding plans. This helped increase expectations of major investments being made over the next 12 months. Concern persisted, however, over political uncertainty, overtonnaging in certain trades, depressed oil prices and a potential dearth of quality seafarers.
"Shipping people are eternally optimistic, with one week of good news seeming to help them forget eight terrible years of hardship and financial loss," said one respondent.
The likelihood of respondents making a major investment or significant development over the next 12 months was up from 4.9 out of 10.0 in the previous survey to 5.4, the highest level since August 2014. There was increased confidence on the part of all major respondents, in the case of charterers up to a level of 6.3 from 5.8 in February 2017. Owners and managers, meanwhile, each registered a confidence level of 5.9, up from 5.1 and 5.6 respectively last time. Confidence on the part of brokers was up from 3.4 to 4.4.
50 per cent of respondents expected finance costs to increase over the coming year, compared to 54 per cent in the previous survey. Owners' expectations fell from 57 per cent to 48 per cent, while managers were also down, from 61 per cent to 57 per cent. More brokers and charterers, however, anticipated costlier finance – 63 per cent of brokers (against 41 per cent last time) and 57 per cent of charterers (compared to 47 per cent in February 2017). "The financial support needed to boost the markets is not yet at expected levels," noted one respondent, "but we believe that the situation will improve in the coming months as demand increases."
Demand trends, cited by 26 per cent of respondents, continued to be the factor expected to influence performance most significantly over the next 12 months, followed by competition (22 per cent) and finance costs (14 per cent). According to one respondent, "Larger companies are targeting their smaller competitors in order to minimise competition and secure a stronger position in the market."
The number of respondents expecting higher freight rates over the next 12 months was up on the previous survey in all three main tonnage categories. In the tanker market, 32 per cent of respondents anticipated improved rates, as opposed to 25 per cent last time, while the number anticipating lower tanker rates fell from 28 per cent to 16 per cent. Meanwhile, there was a 14 percentage-point rise, to 58 per cent, in the numbers anticipating higher rates in the dry bulk sector, the highest figure for three years.
In the container ship sector, the numbers expecting higher rates rose from 31 per cent to 46 per cent, while there was a six percentage-point fall, to 12 per cent, in those anticipating lower container ship rates. Net sentiment was up in the tanker market from -3 in February 2017 to +16 this time, while the increases in the dry bulk and container ship trades respectively were from +33 to +50 and from +13 to +34.
In a stand-alone question, respondents were asked to estimate the level they expected the Baltic Dry Index (BDI) to be at in 12 months' time. More than half (52 per cent) felt the BDI would reach a level of between 1,000 and 1,499, while a quarter (25 per cent) put the likely figure at between 1,500 and 1,999. "Healthy volumes of cargo are being moved," said one respondent, "but there are too many ships around."
"The survey was launched in 2008, on the very cusp of one of the most protracted and severe global economic downturns, with a confidence rating of 6.8. In our latest survey, the figure stands at 6.1 which, given geopolitical, economic and industry developments, must be seen as a robust rating," commented Richard Greiner, Moore Stephens Partner, Shipping and Transport. "Moreover, confidence today of making a major new investment is the highest it has been for almost three years. The positive sentiment on freight rates is welcome, although this must be weighed against the lows to which they have fallen and from which they must continue to recover.
"Even for an industry which is familiar with the volatile nature of international commerce, shipping's ability to survive adversity is worthy of comment. Our latest survey found many of our respondents in watchful mode, mindful of the fact that there are still too many ships, but encouraged to believe that increased demolition and more pragmatism by industry stakeholders will help to redress this imbalance. Respondents also remain cognisant of the impact which geopolitical developments can have on shipping, and it will be instructive to see what effect all this will have on industry confidence in our next quarterly survey."
We continue to hear tales of doom and gloom about the Asian, particularly South-East Asian, maritime industry. Mostly, those tales are based upon the undoubted disaster that is the over-bought and over-borrowed offshore oil and gas sector. That sector, while obviously important, is not the be all and end all of the wider industry. And, even it is showing very definite signs of recovery after too many years of gloom.
Baird Maritime has agreed to join with Reed Exhibitions to organise the Work Boat World Conference alongside Reed's mighty Asia Pacific Maritime 2018 Exhibition in Singapore in mid-March next year. As part of the preparations for that very important event, Reed's marketing people asked me to set out my views on the state of the Asian work boat market for their promotional e-book. Their first question was: “What do you see as some of the opportunities and challenges for the workboat market here in Asia?" My answer is as follows:-
There will continue to be many. First, and most obviously, political. The South China Sea, North Korea, Myanmar and Cambodia stability problems will continue to present challenges. Democratic desires in Hong Kong and Singapore may necessitate changes and Thailand, Malaysia and the Philippines will require further stabilising. In its own mild way, South East Asia is something of a sea of instability. That, as usual, will offer both opportunities and challenges in both the naval and maritime security sectors. In other words, more warships and patrol boats.
Environmental factors, earthquakes, volcanoes, typhoons, tsunamis and epidemics, will continue to require large scale relief and evacuation efforts. These factors reappear relentlessly on almost an annual basis. The vessels required for such work are generally available in the form of warships, seaworthy ferries – particularly large fast ones such as those from Austal, Incat and Damen, and OSVs. The region, generally, is slowly improving its responses to natural disasters. It has the some of the vessels but lacks organisation in the main. Most disaster responses still require outside assistance.
Energy acquisition and creation
Oil, gas, wind and solar and, perhaps, tidal are all important maritime activities now. Asian nations quite rightly tend to avoid the subsidy driven development of energy resources but now that the north Europeans have improved the efficiencies of offshore, wind, solar and tidal power, it seems likely that Asia will start to utilise them absent Europe's development costs. That will mean a whole new demand for specialised service vessels. At the same time, oil and gas will inevitably recover and rig and OSV utilisation will increase in response.
Ports will continue to expand and develop. China's “Belt and Road" concept seems likely to inspire significant additional trade. That will require more and bigger container ships. The land aspects of it will necessitate iron, coal and other minerals so the dry bulk trade will continue to grow again. In the ports, tugs will have to become more powerful and more versatile so as to handle ever larger ships. The latest container ships are now of 22,000TEU size and getting bigger. Pilot boats, line boats and all the working craft of a port will similarly have to get bigger and better.
The Isthmus of Kra Canal proposal has recently been raised again. While it may just be the Chinese and Thais teasing the Singaporeans, it remains a vague possibility. If ever realised, it will require enormous numbers of workboats of every imaginable kind for its construction, operation and maintenance.
Marine construction continues apace with port development, reclamation, dredging, the aforementioned Kra canal, tourist developments and undersea pipelines and cables all requiring dredgers, pipe and cable layers, barges, cranes and other attendant craft. That sector seems destined to continue its inexorable expansion.
Fishing and aquaculture are changing rapidly as the world realises its stocks of wild fish are limited. The fishing industry is having to become far more efficient, economical and less wasteful. A new generation of fishing boats is being introduced in Europe with those characteristics. Fish farming is growing and moving further offshore for environmental and aesthetic reasons. Its equipment and the vessels that serve it will have to get bigger and more powerful. Asia will undoubtedly follow Europe in all these developments.
Passenger vessels, both ferries and cruise, have a very bright future. Cruising in smaller “boutique" ships is becoming rapidly more popular on both inland and coastal routes. We continue to see new vessels being launched. South East Asia, generally, has earned an appalling reputation for ferry fatalities. The Philippines, Bangladesh, Myanmar and Indonesia, between them, are responsible for more than 65 per cent of the world's annual ferry fatalities. That has to stop and many new, safer vessels will be required to do so.
I hope that the governments of those four most dangerous countries for ferry travel in Asia will decide once and for all to reform their domestic ferry industries. Nothing less than a complete root and branch removal of most of their existing operators and their unseaworthy vessels will be sufficient. Apart from the vital result of making ferry travel much safer, it would revitalise the ferry building and equipping sectors in the region.
Properly trained crews are and will continue to be a major deficiency in all sectors. Their absence, is, in large part, the reason for the disproportionately high numbers of fatal accidents in the region. All maritime nations in South East Asia will have to do considerably better in terms of training, educating and recruiting competent crews.
There will be much to talk about and learn at Asia Pacific Maritime at Marina Bay Sands in Singapore from March 14 – 16 next year.