15 January 2016

Moore Stephens predicts volatile 2016:

Portents for year ahead 'not all bad', Greiner says

THE shipping industry will remain volatile and indispensable in the year ahead, with some upside potential, according to a leading firm of accountants specialising in the industry.

Moore Stephens shipping partner Richard Greiner said that while grounds for extreme optimism are difficult to find right now, the portents for 2016 are not all bad.

The Baltic Dry Index is currently touching all-time lows, thanks to sluggish demand from China.

Accordingly, the sector will have to reduce its newbuilding orderbook and increase ship recycling in 2016 in order to restore the balance.

The same is true for the containership sector, where reducing capacity remains the best way to drive up rates.

“CMA CGM's move to buy NOL, meanwhile, although subject to regulatory approval, is an indication of further consolidation,” said Mr Greiner. “It would be no surprise to see more still in 2016.”

By comparison, tanker markets saw a stronger year in 2015, not least because of falling oil prices. But that factor has presented major challenges in the offshore maritime space. Some experts are predicting a slide to $20 a barrel in 2016.

Mr Greiner also highlighted a recent decision from the English Court of Appeal, which found for the assignees of bankrupt bunker supplier OW Bunker, which could see hundreds of owners being asked to pay twice for the same stem.

“In 2016, owners will be monitoring a possible appeal against this decision to the Supreme Court, while keeping an eye on disputes elsewhere,” Mr Greiner said.

Industry operating costs will go up, as will the cost of regulation, with implementation of the Ballast Water Management Convention a clear example here. The threat from cyber security will also rise.
Interest in refinancing, as a means of getting cash out of the business, is likely to increase, as are calls for accelerated ship recycling and a cap on newbuildings.

The effect of geopolitical developments should not be underestimated, while speculation about the UK’s planned Brexit referendum in 2017 will add to uncertainties.

Source: Lloyds list.   7 January 2016
http://www.lloydslist.com/ll/sector/ship-operations/article476975.ece

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