03 January 18 The Business Times by DAVID HUGHES
THE year 2017 will not go down as being particularly memorable for the shipping industry. It was neither awful nor especially good.
Nevertheless, the sentiment within shipping was, apparently, optimistic in the six months to the end of November, said the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.
The firm's shipping and transport partner, Richard Greiner, said: "Confidence is at its highest level for 31/2 years, testament to the industry's remarkable durability."
He added that charterers are leading the way in terms of improved confidence and appetite for new investment.
"There is optimism in the dry-bulk trades, and evidence of continuing improved confidence in the gas sector. The Baltic Dry Index, meanwhile, has risen by over 50 per cent in the past six months, and net sentiment in all three main tonnage categories remains positive."
However, he said that not all the respondents were upbeat and uncertainty still persists, for instance, over how and when to comply with the Ballast Water Management Convention and the true extent of cyber-crime.
But the portents, overall, are encouraging.
A slowdown in newbuilding activity has started to redress the imbalance in supply and demand, and that should be reflected in improved freight rates.
"There is an appetite for investment, and finance is available. The shipping recovery might not yet be fully under way, but 2017 may come to be regarded as the year when the downward spiral was halted," he said.
Shipping confidence has held steady at its highest rating in the past 31/2 years, with the average confidence level expressed by respondents unchanged at the level of 6.2 out of 10 recorded in the previous survey in August 2017.
Digging down into the results, however, shows that owners have become marginally less sure of their prospects, while confidence on the part of charterers was significantly up, from 4.7 to 7.7, the highest rating recorded for this category of respondent since the survey was launched in May 2008 with an overall rating of 6.8.
Managers (up from 5.8 to 6.1) were also more optimistic, while brokers' confidence was unchanged at 6.3.
Perhaps significantly for players in the Asian shipping markets, confidence levels here were down in Asia, from 6.4 to 5.7, but unchanged in Europe and North America, at 6.3 and 5.8 respectively.
Although overall expectations of making major investments over the next 12 months were marginally down on the three-year high recorded in the previous survey, several respondents saw encouraging signs of recovery and potential for further improvement, particularly in the dry-bulk sector.
One respondent said: "Undeniably, things are a little better, but there is not such a significant improvement that we can break out the champagne and celebrate a recovery."
Demand trends continued to be the factor expected to influence performance most significantly over the coming 12 months, followed by competition and finance costs.
One comment was: "Shipping continues to be volatile and unstable, with an oversupply of tonnage, and new finance continuing to pour in, while geopolitical issues and new regulations are causing disruption."
Talking of new regulations, it is a bit surprising that shipowners haven't been focusing more on what will happen in two years, when the global International Maritime Organisation 0.5 per cent sulphur cap comes into force.
Possibly that is because the effects of the new rule will be less dramatic than widely predicted.
Naval architecture and engineering consultancy Foreship has been looking at the options. It says that, with just over 100 ships running on liquid nitrogen gas (LNG) today, the number in service is likely to be significantly below 500 by 2020.
At the same time, it predicts, while the 0.1 per cent fuel sulphur content limit inside emissions-control areas has brought about 1,500 scrubber installations, yard capacity can only grow that number to 3,000-4,000 by 2020.
The consultancy believes most ships will run on 0.5 per cent sulphur content fuel that will be blended from distillates and heavy fuel oil of up to 2.5 per cent sulphur content.
However, Foreship says that high sulphur heavy fuel oil will become so price-competitive that the oil companies expect that up to 30 per cent of commercial shipping will gravitate back to high sulphur fuel oil by 2030, and use scrubbers to comply with the emission regulations.
Meanwhile, classification society DNV GL, which has been doing some serious crystal ball gazing, has published its Maritime Forecast to 2050, which analyses the impact of the changing global energy system on the shipping industry through to that year.
Its group president and chief executive Remi Eriksen said: "Big and rapid changes are happening in the way the world uses and produces energy.
"Our Energy Transition Outlook shows that by mid-century, the energy supply mix is likely to split equally between fossil and renewables. Advances in energy efficiency will also see the world's demand for energy flattening after 2030. These trends will impact all players in the maritime sector."
The Maritime Forecast projects that, heading to 2030, shipping will continue to enjoy robust growth.
From 2030 to 2050, demand will continue to increase, but less rapidly - with the growth primarily in non-energy commodities, such as the container trade and non-coal bulk.
In addition to the changing energy production and export patterns, shipping's fuel mix will become much more diverse.
DNV CL expects that, in 2050, oil will remain the main fuel option for trading vessels, but natural gas will step up to become the second-most widely used fuel, and new low carbon alternatives will proliferate.
Returning to the here and now, it looks like 2020 will not be the huge shock many had feared, so the message for 2018 is keep calm and move ahead cautiously.