outlook
Still half full rather than half empty
M
ore than ever, shipping will be an industry for long-term players. Operating costs increased in 2011, while the global economic climate deteriorated at a rate outpaced only by the growth of sovereign debt in some eurozone countries. The markets are languishing and are likely to fall further. We have seen how, for the first time in a long while, some of the big tanker-owning companies have come under financial pressure. More owners and operators are likely to seek to renegotiate agreements with their financiers or with the yards building their ships, or with both. And we can expect finance costs to increase, along with operating costs. Over-tonnaging, meanwhile, remains the spectre at the feast, were there a feast to enjoy. We may see government intervention in 2012 to rescue ailing yards, at least on the part of those governments still in a position, financially, to intervene. ‘Impairment’ is
likely to become a more
familiar term in shipping circles, along with ‘Chapter 11’. The hand of government will also be evident in the tax affairs of the shipping industry. The UK has promised to consult on tonnage tax, which could permanently restore some of the benefits lost in the 2009 re-interpretation of the rules. And the EC should commence its review of tonnage tax regimes in EU countries.
Meanwhile, demand for seaborne trade
Shipping will need considerable resilience to meet the challenges of the coming year, warns international accountant and shipping adviser Moore Stephens, but for those who can secure funding there have been few better times to invest
by Doug Woodyard
continues. Even if there is not enough work for all the new ships, we are seeing the emergence of a younger and more environmentally friendly fleet. There is also evidence of some rationalisation of competition which should feed through to better rates.
Shipping’s glass is still, remarkably, half-full
rather than half-empty. Many owners, managers and charterers
are reasonably confident of
making a major new investment or development in 2012. Moreover, the underlying global nature of shipping continues to work in its favour. Given the choice between a domestic retail business in Kolonaki and a shipping business in Akti Miaouli, most would opt for the latter. Shipping may not turn the corner in 2012. Nobody yet knows where the corner is. Wider political and economic developments, as always, will play a part. It is said that there is nothing
so admirable in politics as a short memory. In shipping, those who can remember the past and have a plan for the future will be the ones who fare best.
In its Shipping Confidence Survey for the quarter ended November 2011, Moore Stephens noted that the eurozone crisis featured prominently in comments from respondents. Above everything, said one, it is the European financial crisis which will decide how things turn out for shipping in general and for owners in particular. State intervention was foreseen by another respondent, noting that the supply overhang in almost all sectors remains a serious challenge despite slippage and cancellations. Cancelled newbuildings will still be built, especially in China, where they will simply be owned by state-supported yards and operators, and will therefore continue to add to the level of over- supply. Ship finance will be available to only a few, financially strong, companies. The USA and Europe need to take some drastic recovery measures sooner rather than later, reported others, while the tonnage over- supply situation, plus the eurozone crisis and a depressed world economy, equals misery. One respondent believed the summer of 2012 would be the worst he had experienced. The over-supply of tonnage bought at inflated prices, combined with turmoil in north European manufacturing, would mean that shipping companies, brokers and owners not involved in transporting food products would be the hardest hit.
Operators of the world dry bulk fleet of
Nissho Shipping’s 38,000 dwt geared bulk carrier Santa Vista entered service last October from Naikai Zosen with a Hitachi-MAN B&W S46-C7 low speed engine (see page 97)
www.mpropulsion.com
more than 8,900 ships have been accepting unprofitable charters in a glut of tonnage, even as global trade in commodities expanded to a record level. Earnings for Supramaxes – a category of Handysize bulkers of 50,000-60,000 dwt – trading the Atlantic region went from bad to worse, the Baltic Exchange reported in early February. Supramaxes fell for a 47th consecutive day, their longest-ever losing streak, dropping 2 per cent to US$6,353, a three-year low. A Supramax bulk carrier was recently chartered by Danish operator Norden at no cost other than bunker charges, its first such transaction in 25 years. The vessel – off the Spanish coast at the time of the deal – was assigned to take a cargo of gypsum (used in making plasterboard) to the US east coast. MP
Marine Propulsion I February/March 2012 I 9
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