According to The Way Ahead survey by Norton Rose Fulbright
According to a transport survey conducted by Norton Rose Fulbright, sentiment among respondents from the shipping industry has deteriorated sharply over the past year. In 2009, a mere 7 per cent of respondents reported that market conditions were good or very good.
Last year, 69 per cent were optimistic. That has changed this year: just a third of our shipping respondents report that the current trading environment is positive for their business. Overcapacity is the main reason given for their despondency.
Just one third of shipping respondents believe market conditions are positive for their business (compared with 88 per cent of aviation respondents and 91 per cent from the rail industry).
Sentiment in the shipping industry appears to have fallen sharply over the past year, when 69 per cent of respondents (in 2014) reported that market conditions were generally positive. This despondency can be attributed principally to overcapacity and new shipbuilding orders, which has affected the industry since the onset of the global financial crisis in 2008. This is followed by, to a far lesser extent, global economic uncertainty.
Those who believe that current market conditions are positive for the shipping industry point to an anticipated return to economic stability in key markets, the emergence of new opportunities, and the availability of funding for investment and growth.
Respondents are divided over the outlook for the industry over the next five years. While the industry generally appears confident that passenger numbers and freight volumes will increase, just half believe that fares and freights will rise. The picture is similarly mixed when it comes to investment and innovation. A third of respondents believe the allocation of available funds to investment rather than operating costs will increase, while 24 per cent think it will fall. Half anticipate that investment in infrastructure will rise, compared with 39 per cent who believe the level of investment will not change. Similarly, while 45 per cent expect an increase in the number of routes and services offered, 47 per cent believe that this will remain static.
Respondents indicate that consolidation will emerge as a major theme for the shipping industry
Twenty-nine per cent believe that a merger or acquisition presents the optimal investment opportunity for shipping. A further 28 per cent believe that joint ventures, alliances and pools present an attractive opportunity. Innovation – through the development of new market sectors and new geographical markets – is viewed as significantly less attractive, selected by just 10 per cent and 5 per cent of respondents respectively.
China continues to lead the field as the market offering the best investment opportunity over the next two to five years. Interest in China has increased in the past year, selected by 37 per cent of respondents, up from 18 per cent in 2014. Respondents also indicate a growing interest in India, up from five per cent last year to 31 per cent this year, and south-east Asia, up from 11 per cent to 21 per cent. Other markets that appear increasingly attractive to the shipping industry include North America and western Europe.
When asked what they believe will be the most significant change to the shipping industry over the next five years, respondents have returned to the theme of consolidation, with larger participants expected to become more dominant and increased joint venture, alliance and pooling activity anticipated. The availability of new funding sources is also expected to change the shape of the industry in the coming five years.
Respondents indicate a growing interest in investing in Asia’s emerging markets. Inevitably, an emerging market slowdown is viewed as the greatest threat to the shipping industry over the next five years.
This is followed by geopolitical events outside the Eurozone and continued political and economic uncertainty within the Eurozone.
When asked what presents the greatest challenge to the operational efficiency of the shipping industry, 55 per cent of respondents return to the issue of overcapacity. This is followed by a lack of suitably qualified people, cited by 15 per cent. Despite concerns over recruitment, just 4 per cent view the development of the size and skills of the shipping industry’s workforce as the optimal investment opportunity for the maritime industry.
Of the new regulations implemented by governments around the world in recent years, environmental regulation is cited by respondents as having had the greatest impact on the shipping industry, selected by 49 per cent of respondents. The introduction of new and extended economic sanctions is cited by 14 per cent, while 25 per cent put uncertainty around the application and enforcement of new and existing regulations ahead of any specific regulatory development.
Indeed, almost half of respondents believe that greater transparency in the application and enforcement of existing and proposed regulation would be the most helpful form of government support for the shipping industry, with a further 26 per cent citing deregulation.
Prospects within the aviation and rail industries are looking good, in contrast to the general mood within the shipping industry, which has deteriorated sharply over the last twelve months.
Read the results of the survey by clicking below:
Source:Norton Rose Fulbright
