In our fourth annual Transport Survey we have once again sought to gauge sentiment as to the extent to which the shipping industry (along with the aviation and rail industries) is weathering the after effects of the financial storm of 2008/2009 and what signs, if any, we can detect of recovery on the horizon. Our fourth Survey went out to the market in November 2012 and closed in February 2013, with over 1000 respondents1 from across all three industry sectors, of which over 300 were in the shipping industry. In this article we look at some of the key findings for shipping in our fourth Survey.
When we published our first Transport Survey in 2009, there were, understandably, quite serious concerns across all three sectors as to the potential impact of the financial crisis. A year later, in our second Survey, the general outlook of respondents was noticeably more positive, with many hopeful of a quicker recovery than at first anticipated. By our third Transport Survey, however, views across the aviation, shipping and rail industry had become increasingly polarised and, amongst shipping respondents in particular, the mood had become notably more downbeat. In this fourth Transport Survey, it is evident that recovery continues to be slow across all three sectors, with particular concerns expressed about the lack of funding and rising costs. However, there is also a renewed and tangible sense of optimism again, even in shipping, in spite of industry concerns elsewhere about a predicted rise in the number of insolvencies and mortgage enforcements in 2013.
We started our fourth Survey with the question "Where are you now?" and asked respondents to look back to 2010 (one year on from when the first impact of the financial crisis was being felt) and cite changes they had seen to their businesses since 2010 in key areas, such as strategy, turnover, fixed costs, workforce, asset employment and finance. Our third Survey had indicated a turbulent time for shipping as hopes of a more speedy recovery in 2010 had dampened in 2011. Unsurprisingly perhaps, on the question of strategy, 58 per cent of respondents from the shipping industry confirmed that they had sought to change their market position since 2010, whether in terms of market segment, operations or range of products and services offered. Out of those 58 per cent, it was interesting to note that actual or planned changes were "positive" changes - entry into (rather than withdrawal) from one or more new market segments (51 per cent), an increase (rather than decrease) in the range of products and services (49 per cent) and entry into (rather than withdrawal from) new geographical markets (39 per cent).2 43 per cent of respondents from the shipping industry also reported an increase in turnover since 2010 compared to 34 per cent who reported a reduction in turnover. Again, a more positive percentage than might have been anticipated in the current climate. Against this, increased fixed costs (48 per cent) and continuing financial constraints (price, cost or funding pressure) (42 per cent) stood out (as for other industry sectors) as clear areas of concerns for the shipping industry.
Respondents were also asked what geographical market was important to their business3. Europe and Asia Pacific (both cited by 39 per cent) were the market leaders for shipping although given that there was some correlation between the location of respondents and the choice of region (particularly with Asia respondents), it may be that not too much weight should be placed on these results. More interestingly perhaps, in section two of the Survey, respondents were also asked which financial centre they felt was best equipped to service their financing needs. London came out as a clear favourite in all three industry sectors, with 40 per cent of respondents from the shipping respondents industry voting in favour of London (perhaps less surprising for shipping given London's long history as a maritime centre).
Access to, and choice of, funding was again a theme in this year's Survey. Respondents were asked what financing sources they might use or consider in order to assist with recovery and to promote growth in their industry. In shipping, private equity was notably on the rise as a favoured alternative source of finance (23 per cent), followed by export credit finance at 20 per cent. Bond finance was also endorsed by a healthy 17 per cent of respondents from the shipping industry, which interestingly put it on a par with syndicated debt (17 per cent), the more traditional source of finance for the shipping industry before 2009.
The focus of the second part of our Survey is on the future. We asked our respondents to vote on a number of options as to actions required in the short to medium term to help with recovery, and bring growth and stability back to their transport sector. For shipping, the two most urgent infrastructure needs were identified as upgrades to port or terminal facilities (30 per cent) and better road or rail access to ports (29 per cent). Respondents were also asked what should be the key focus areas for their industry and in shipping (aswell as, unsurprisingly, in aviation) a clear majority opted for more efficient fuel consumption (69 per cent), reflecting concerns in both industries as to the impact of high fuel costs. In shipping, the next most important focus area was determined to be technological improvement (40 per cent).4
Another focus topic of the Survey was the importance of Government support to each sector. In shipping, Government support was cited as essential by a majority of 68 per cent of respondents but coupled with this was the more pessimistic view that Government support over the next five years is likely to be inadequate (65 per cent). Infrastructure investment (57 per cent), followed by fiscal incentives (31 per cent) and deregulation (31 per cent) were determined to be the most helpful forms of Government support.
This year, we also included a new section in the Survey on insurance, in order to look at what is happening in relation to the management of insurance claims, for the purpose of charting trends in the insurance sector. The results of the analysis are presented in tabular form in the Survey and suggest that the majority of respondents to date have not seen a marked change in activity in relation to insurance claims, but possibly an increase in consultations with intermediaries and professionals advising on insurance claims.
Overall, and perhaps particularly from some of the respondent commentary, it is apparent that the shipping industry is still navigating its way through very uncertain waters. Respondents remain realistic about the challenges that lie ahead but on a more encouraging note, are also looking ahead positively, and planning strategies to enable them to take advantage of the opportunities that recovery will bring.
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1For a full breakdown of respondents by industry, region and respondent type, click here for the full Survey.
2Respondents were able to select more than one option.
3There was also as might be anticipated, a strong correlation between the region where the respondent was based and the region cited to be of primary importance.
4Respondents were able to select up to three options.
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