Trade wars and regulations impact shipping confidence
Overall confidence in the shipping industry fell over the past three months. This is largely a result of ongoing concern over trade wars and increased regulation, according to accountancy and business advisory firm BDO’s latest Shipping Confidence Survey.
“A small dip in confidence is not surprising given the recent volatility generated by the US-China trade wars, the heightened tension in the Arabian Gulf, the failure to conclude Brexit negotiations, and general political instability in many parts of the world,” said Richard Greiner, Partner at BDO London, Shipping & Transport. “Markets love volatility, but it can have an adverse effect on confidence.”
Confidence level drops
The average confidence level in the three months to May 2019 was 6.1 out of a possible maximum of 10.0. This is slightly down on the figure of 6.2 recorded in February 2019. Yet, there were regional differences. Asia and North America seem to have gained some confidence from the trade wars with confidence going up from 5.8 to 6.0 and from 5.6 to 6.4 respectively. In Europe, there was a drop in confidence from 6.3 to 6.1.
Another recurring topic are the cost and technical implications of complying with existing and incipient regulation. This was typified by a respondent who noted that the high level of regulation “makes it extremely difficult to make a profit”.
Yet, there are some bright spots on the horizon. The survey also reported respondents, ship owners in particular, were more likely to make a major investment the coming year, especially in Asia and Europe. In addition, freight rates in the tanker and container market are expected to rise, with only the dry bulk sector lagging behind.
Greiner added to this: “Despite the challenges the industry is facing, there are a number of positive indicators. New technology is making shipping more attractive to investors, and will moreover act as a trigger to accelerate the pace and extent of recycling. Higher freight rates should logically follow, and those who hold their nerve will ultimately benefit.”