Expert Market Survey: Shipping industry takes an optimistic view of the future
Hamburg/Kiel, July 8, 2014 - Confidence among shipping companies in the industry continues to grow – in 2014 a clear majority of companies expect increased turnover and more than 40 per cent expect higher profits in comparison to the previous year.
This is documented by the most recent expert market survey published by HSH Nordbank AG, which discusses the topic “Shipping companies 2014 – Fit for the future?”. The report, based on a survey of HSH Nordbank customers, provides a picture of sentiment of the present state of the shipping industry. In some cases the views of German and international shipping companies regarding markets diverge significantly. 51 German and international shipping companies participated in the survey, which was conducted in the second quarter of 2014.
It is noticeable that the expectations of German and international shipping companies concerning profits differ. German companies take a far more cautious view than their international competitors. Only around one-fifth of German companies predict increased profits in 2014 while, in contrast, 57 per cent of the international companies predict increased profits.
Despite the present surplus capacity, shipping companies are focusing on further expansion of their fleets – “Almost 70 per cent of respondents stated that they want to increase the size of their fleet in the next three years,” says Christian Nieswandt, Global Head Shipping Domestic Clients/Global Liner & Container Finance at HSH Nordbank. The majority of international (63 per cent) and German (47 per cent) shipping companies are striving to achieve growth in the bulk carrier segment in particular.
“Our findings for the container segment are striking,” continues Nieswandt. “Despite the acknowledged surplus capacity over half of the German shipping companies we interviewed want to further expand their container ship fleets.” International shipping companies are significantly more cautious in this market segment, with only 13 per cent planning expansion. All companies agree that the greatest market opportunities exist for smaller units up to 4 000 TEU (20 foot standard containers) and for very large container ships of over 12 000 TEU.
Increasing charter rates in the bulk carrier segment
Respondents estimate that charter rates for bulk carriers in particular will develop positively. “Almost 70 per cent of the companies expect increasing rates for the bulk carrier segment by the end of the year,” says Nieswandt. In contrast at least half of the shipping companies participating in the survey expect container vessel charter rates to remain at the present low level. A third of companies nevertheless believe that a general increase in charter rates to the pre-crisis level is possible. The majority of respondents (63 per cent) do not, however, believe that charter rates will return to the high pre-crisis level, meaning that certain projects are no longer viable in the mid-term and must be terminated.
Increasing surplus capacity, not only for container ships
The survey indicates that a wave of new construction can be expected, which will further exacerbate the problem of surplus capacity. Respondents believe that the greatest surplus capacity exists in the container vessel segment, in particular in the size range from 4 000 to 8 000 TEU. Shipping companies also expect excess tonnage in the bulk shipping segment.
Bank loans remain the most important source of financing / Private equity increases
“Bank loans remain the most important source of financing in addition to equity, despite the shipping crisis which commenced in 2008,” states Nieswandt. However general attitudes to the various forms of financing have been revised; while the German “KG” business model was the third most important source of financing prior to the crisis this option is rarely used to finance ships today. The volume of private equity has instead increased significantly in comparison to the pre-crisis era – 14 per cent of respondents are already financing their ships with the assistance of, among other sources, private equity. This figure was only two per cent prior to the crisis. “In this context, German shipping companies view the influence of private equity in the shipping industry in a far more negative light than international shipping companies,” adds Nieswandt.
Strategies for the future: Retrofitting and consolidation
“Two-thirds of the companies expect a wave of consolidation, particularly in the container shipping segment,” comments Nieswandt. Objectives in this regard are to create larger companies, for example via fusions, thus facilitating more competitive corporate structures. To this end some 40 per cent of respondents have already held meetings to discuss possible M&As (Mergers & Acquisitions) in the role of the acquiring company. 47 per cent of German shipping companies are doing so, significantly more than among international companies (37 per cent).
In order to meet the future challenges facing the shipping industry just under half of international companies are focusing on retrofitting, that is re-equipping their fleets to achieve greater energy efficiency and meet present environmental standards. This topic is, overall, of far less importance to German companies in comparison; they view the formation of alliances and mergers as a more promising strategy for the future. Both German and international shipping companies are in agreement that the optimisation of business processes and investment in new vessels meeting eco-standards should be given priority if future challenges are to be met.
The Expert Market Survey Shipping can be downloaded
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