Shipping Industry Faces Crisis of Confidence as Fears Mount of Huge Losses and Weak Demand

CONFIDENCE in the shipping industry has fallen to its lowest level in three and a half years because of overcapacity, declining freight rates, rising bunker costs and increasing uncertainty in global economy.

According to a latest Shipping Confidence Survey report from international accountant and shipping adviser Moore Stephens, the average confidence level in August responded by key market players in the shipping industry worldwide was 5.3, on a scale of 1 (low) to 10 (high), compared to 5.6 in the previous survey inMay.

This is the lowest figure recorded since the survey began in May 2008 with a confidence rating of 6.8 - the highest so far.

Richard Greiner, a shipper partner of Moore Stephens, said it was a disappointment to see a decline in shipping confidence. "Confidence remained surprisingly high last year, but it started to slip in 2011. Indeed inmany ways, it is back to the levels of two years ago."

Also, the report stated that confidence level among shipowners from June to August fell from 5.8 to 5.1, the lowest owner rating recorded during the life of the survey. Confidence levels among charterers were even lower at 5.0. And confidence on the part of ship managers dropped from 5.8 to 5.6, while brokers remained comparatively low rating of 5.1.

One respondent was quoted as saying: "Until recently, things looked quite optimistic, but recent doubts over US loan credibility and EU financial worries have severely dented confidence."

Other respondents said it is the most unpredictable period now since the outbreak of the global financial crisis in 2008 and suggested that the market was "back to levels last seen in 2001". And a more lamenting viewpoint is that few could see a short-term solution to the difficulties.

Besides gloomy an economic outlook, overcapacity is another concern. "Markets are at rock-bottom," said one respondent, adding that the current over-tonnage problem will continue to exist for some time "because of the large number of new vessels due to come into service. Older vessels and speculative investors, as well as low-grade operators, will have to disappear before the situation can start to improve."

A respondent was cited as saying: "The situation looks pretty grim, given the massive amount of over-ordering."