Corporate law firm Norton Rose Fullbright’s annual survey of the transport industries paints a gloomy picture as far as shipping is concerned with virtually no positive sentiment to be found anywhere within it. The survey can be found online.
There is no indication as to who the respondents to the survey were or how many opinions were sought but predictably over capacity and the threat of a global recession are seen as the biggest problems facing the shipping sector. Some 85% of respondents believe that the outlook for shipping is negative meaning just 15 percent believe that market conditions are positive for shipping currently. That compares with 77% from the aviation industry, and 92% from the rail industry.
Sentiment within shipping appears to have fallen further this year. In 2014, 69% reported that market conditions were positive for the industry, plunging to 33% in 2015. Overcapacity is the principal reason given for this malaise, followed, to a lesser extent, by economic uncertainty in key markets. In response to the question ‘What has had the greatest impact on shipping over the past decade?’ 49% consider the answer to be environmental regulation.
What is interesting is that few of the questions and none of the answers looked at changing social conditions in the world. It is well known that the most positive factor for shipping in recent years has been China’s ramping up of manufacturing output helped in a large degree by globalisation which has also improved other economies in Asia.
All over Europe and the US where consumerism has driven the growth in world trade, manufacturing has been shifted to Asia and the promised returns in trickle down wealth to ex-employees have not happened. Instead, executive salaries have soared to stratospheric levels and dividends to bond holders have likewise increased. While some countries can point to employment statistics as evidence of the success of globalisation, the disposable income of many of the population are well below former levels. In addition, much of the supposed improvement in employment levels is due to hiding unemployment behind extended education age and self-employed statistics.
Shipping cares little about GDP and values of trade, it exists to carry volumes of cargoes and it is clear that in many areas it is volume that is decreasing. That is not helped by financial institutions investing in ships as assets because if a ship is built based on a project return and the intended return does not materialise, the physical presence of the ship drives down profitability for all. It is not something that can easily be converted into something else in the way that a factory production line can switch from televisions to computers with only minor modification.
Dissatisfaction with globalisation is growing in the west and while many say that it is an irreversible process the truth is that it can be reversed partially or fully at any time. But there will be a hit to those that have benefitted the most and who have so far not carried out their part of the bargain. Ideas about paying the population a free living salary such as have been raised and seriously considered in Finland, Switzerland and parts of Germany this year alone may one day come to pass and then they will need to be financed and the obvious way to achieving that is by higher corporate and personal taxation.