Inside the last century, the global merchant shipping industry has seen the increasing trade volumes along with the expansion of free trade and the increased demand for consumer and industrial goods. However, it is inside the last 50 years that shipping has become the predominant means of merchant transportation globally, making it responsible for the transportation of approximately 90% of global trade. Main reasons for this leading position of shipping are of course globalization of trade and important technological advances that have taken place in the industry. Although the industry is growing, shipping is cyclical as well as capital intensive. By this, we mean that it is highly affected by the aggregate global demand for industrial or consumer goods whereas the global macroeconomic and financial events can affect the values of the shipping assets and their financing levels. Despite this, shipping industry as a whole is already diversified at some level.
Different types of vessels are employed concurrently at every phase of the business cycle but with different performances depending on the phase of the cycle and the global demand levels. So in the main categories of shipping, we meet tankers which transport crude oil, petroleum and chemical products, bulk carriers which transport unpackaged bulk cargo, such as grains, coal, iron ore, and cement, container ships which carry most of the world’s manufactured products, specialist ships like offshore supply vessels, anchor handling tug supply, platform supply vessels and construction support vessels among others. Finally, we meet Ferries which are passenger and vehicle ships (roll-on – roll-off, RoPax etc.). All these different types of vessels support today’s global transportation industry by offering a good diversification for those considering an investment in the shipping sector.
Shipping faced a serious economic downturn in the 2008 global financial crisis. From then on, it has faced and continues to face constant challenges and interesting changes. From recent collapses of shipping giants to good M&A activity that has taken place in the last 12 months and with the bigger deals taking place inside the last 3 years, the industry adjusts itself to the new policies and environmental regulatory standards that are about to be established soon and to those already implied. All these are expected to increase the financial burdens of shipping companies which are already facing increased pressures on their margins. Proactive anticipation has become the new norm in the industry, and it is definitely a realistic way for shipping managers and ship-owners to face the regulatory stakeholders.
Despite all the challenges, the existing functions of shipping like the proper management of security standards, the operational and technical management of ships, the management of the chartering function, the ship selection and acquisition process and the management of human resources and multicultural diversity are being kept at a very good quality level worldwide and this good level is expected to increase further also due to increased competition in the market. For the coming years and according to a consensus by many analysts’, we expect on average for the industry’s benchmark players the Earnings per share and Return on Equity ratios to be higher than the last 5-year average. It will take a long way, however, before seeing again pre-crises rates. Under these new circumstances, shipping companies will still have to optimize their fleet, acquire new vessels, hedge against macroeconomic, geopolitical and environmental risks while confronting at the same time the extra costs of the new policies. Therefore it is crucial for the shipping companies to manage cautiously the financing activity as an on-time and well-structured financing will determine the quality and types of fleets that will dominate the seas the coming years. The longer-term view for an industry moving in parallel with the increase of the global population, and new infrastructure developments that are expected to take place in major economic hubs of both east and west, suggest that the industry can proliferate enough from the estimated increase in demand.
World seaborne trade has increased in a steady manner the last years and this is also reflected on major shipping stock benchmarks. Shipping transportation remains efficient, safe and economical and is set to remain competitive as an industry. Even if the current year is not an easy one, global maritime trade is expected to increase.