The shipping sector is likely to see consolidation, bigger involvement from private equity/hedge funds and bank enforcement of loans, according to an extensive survey by the Norton Rose Group.
Norton Rose, an international legal practice with specialism in transport, found that 77% of survey respondents expect consolidation, while 30.8% think owners will enter into mergers and joint ventures. A further 22% think owners will sell assets and a further 20% expect a pooling of assets to maximise efficiency.
More than half think private equity funds will take a significant role, with nearly 70% believing they will join with banks and shipping specialists to take advantage of low vessel/stock values.
Some 63% of respondents predict a substantial number of bank enforcements of problem shipping loans, with 42% pinpointing the peak to come in six to nine months.
But while the report presents a dire picture of an industry with too many vessels and not enough trade, one shipping company said the short-sea forest products business was escaping the worst of the effects hitting other dry bulk sectors and containers.
Scotline Ltd managing director Peter Millatt said the shipping industry worldwide was paying the price for the biggest boom two to three years ago, with the market collapse causing a “disaster” in container shipping.
“With the Scandinavian short sea and north European dry bulk market we never had the peaks of very high rates and we never had the troughs but there are still too many ships about,” said Mr Millatt. “The Canadian/Far Eastern vessels have mirrored the big bulk carriers but to a lesser degree.”
Long-term contracts created more stability in the short-sea business, he added, but uncertainty remained over the timing and effect of a Chinese trade recovery.
He thought banks had got their fingers burnt during widespread repossession of ships in the 1970s and 1980s. They were now being more sensible, knowing that calling in loans would leave them with lots of ships to manage or sell at fire-sale prices.
