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."
Last month I participated in the Interferry conference in Split, Croatia, as a presenter, panel member and very interested observer and networker.
Over the past twenty-seven years I have attended nearly half the Interferry conferences and have invariably found them to be interesting, stimulating and very useful.
Indeed, I was the one who persuaded the then board of the International Marine Transit Association to change its name to the much more manageable and appropriate Interferry that I had previously reserved as a domain name. I was pleased to give it to the association. That was in Cebu in the Philippines in 1999.
Since 1990, the association has progressed from being very North American focused to truly international in outlook and approach. This has improved its utility and appeal enormously.
The great and good of the global ferry industry, plus a couple of others, are regular attendees at Interferry. This year was the biggest yet with more than 370 delegates plus about 80 “accompanying persons". The programme is tight with two full days of conference deliberations lightened somewhat by breakfasts, lunches, dinners, a “technical tour", a golf day and a sailing regatta.
The conference offers a really good mix of serious and social activities that facilitate knowledge sharing and networking. Deals are done and almost all attendees return home looking forward to the next event.
So, you get to talk, eat and socialise with a wide range of ferry owners, ship builders, naval architects, financiers, lawyers, bureaucrats, classification society people, ship brokers and engine and equipment suppliers from all over the world. That enables the enthusiastic participant to gain an unusually wide perspective of the state of the global ferry market that would be unobtainable elsewhere.
So, what did I learn? First and foremost, the global ferry market is in good and improving shape. I won't say it is booming but it is flourishing and appears likely to improve further. The tourist industry is strong, marine tourism, particularly, is very strong and the commuter ferry market is being encouraged by ever increasing road traffic congestion in the world's major cities.
The last ferry boom took place about twenty years ago. Many of the vessels launched then are up to their second refurbishments and some are being replaced. The previous ferry flurry was about fifteen to twenty years before that, in the early 1980s. While many vessels from that period are still happily and economically operating, many others require substantial upgrading or replacement.
Technical developments, as with cars and aircraft, mean that it is often more economical to replace a ferry than to refurbish it. Newer vessels are usually significantly more fuel and environmentally efficient; safer; more economical; and, more comfortable. Design, construction, engines, propulsion systems, electronics, seating, air-conditioning, berthing arrangements, and passenger handling systems all continue to improve as many of the Interferry presenters advised us.
Operating methods and procedures are changing, too. As Incat Chairman, Robert Clifford, in his comedy duo presentation with his competitor, Austal's Mike Wake, informed us.
Faster turnarounds, such as he showed us at Denmark's Mols Linien, reduce the need for flat-out speed. Mr Clifford has been saying for years that his ferries do not always need to run at 35 knots plus. Often they could be operated very effectively and much more economically at half that speed.
The other attributes of catamarans and trimarans, their great stability and safety, remain whatever their operating speeds, both members of the duo agreed.
Mr Clifford's biggest complaint was that so many of his early ferries built around 35 years ago are still going strong. He has been hoping to build their replacements for years but their owners are perfectly happy to keep them operating.
However, demand for both commuter and tourist ferry travel is increasing practically everywhere. In London, for example, Thames Clippers has grown from one primitive 54-passenger boat in 1999 to a fleet of sophisticated 180 passenger ferries less than twenty years later. Bangkok's Chao Phraya Express Boat Company continues to grow its fleet with an increasing proportion being devoted to tourists.
A quick examination of the Passenger Vessel World news section of www.bairdmaritime.com reveals an ever and rapidly growing list of ferry orders and launchings. In almost every case their quality, efficiency, comfort and safety is significantly better than the vessels they replace.
Interferry certainly had a strongly positive atmosphere. I can't remember anyone I spoke to harbouring any negative thoughts about the global ferry industry or market. I have a very strong feeling that we are in for a few very good years.
Plan ahead. The next three Interferry conferences will be held in October 2018 and October 2019 in Cancun, Mexico and London respectively. Hobart, Tasmania will follow in 2020.