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Norton Rose Shipping Industry Survey Paints Bleak Picture

September 14th, 2009 Michael McDonough

Lloyds List, a leading maritime and transport news terminal, reported the results of the first major shipping industry sentiment survey since the beginning of the economic downturn that was conducted by Norton Rose.  The survey “has painted a bleak picture of the sector with the vast majority of companies predicting that economic conditions will get worse before they get better. “  The results showed that 81% of those surveyed expects that it will be at least one year before the number of banks lending to the sector increases.  Additionally, 79% do not anticipate that lending will return to its pre-crisis levels within three years.  Possibly more concerning was this, “Of the shipping companies polled, 63% expected to see major bank enforcement of problem shipping loans, while 43% thought that this process would peak within the next six to nine months.”  It is important to note that this survey was not specific to the dry bulk sector.  The piece concluded with this comment from Harry Theochari, Norton Rose head of transport, “Notwithstanding the large number of cancellations of new orders, there is still a huge number of newbuildings, in all sectors, to be delivered between now and the end of the year. Unless there is a marked pick up in the world economy it is my view that ship market values and shipping stock prices will continue to decline until at least the end of the year.”  The shipping industry survey helps support my view that the industry is in the midst of a protracted downturn with limited upside potential over the short-term.  The DBSI is presently trading -2.6% below the level when it was introduced on May 22nd 2009.

Source: Bloomberg, Capital Link, & My Calculations

Source: Bloomberg, Capital Link, & My Calculations

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