With the global economy on the brink of recession, the ‘supercycle’ experienced by the shipping industry in recent years has seen a sudden and dramatic reverse as it prepares to enter its most difficult trading conditions since the late 1970s/early 1980s.  Deloitte notes that as the financial crisis continues, the reduced number of financing options will start to impact the shipping industry.

George Cambanis, head of global shipping at Deloitte, comments: “The shipping industry has weathered many a storm, but this time we are seeing an unprecedented combination of forces at play.  Lack of demand is being exacerbated by the financial crisis, with letters of credit either not being issued, or honoured.  As a result there has been a shortage of cargoes, which is leaving the dry bulk and container sector particularly vulnerable.

“There are also concerns over credit availability for the industry’s large new-build order book.  This is especially pertinent now, given that the industry is estimated to need an additional $262.5bn* over the next four years in fresh financing. The industry is unfortunately walking the plank of distress.”

Carlton Siddle, reorganisation services partner at Deloitte adds: “This combination of stressed financing alongside the dramatic drop in demand for consumer goods and commodities is compounding the traditional cyclical nature of the industry. There have always been peaks and troughs, but as we enter a period of unprecedented economic challenges the amalgamation of all these factors has made this trough the sharpest we have seen in over two decades.

“It is not all bad news, however. As ever, there will be winners and losers, and the scope for cut-price vessel acquisitions, and fleet and/or company consolidations are rife.  Unlike many other industries there are no dominant players who run the risk of monopolising the sector. As such those companies with strong cash and financial reserves, which have diversified their exposure away from the dry bulk and container sectors, will be able to make opportunistic acquisitions across the board.”

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Note to editors

* Figure from Petrofin.

In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms.

Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities.  Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms.

The information contained in this press release is correct at the time of going to press.