Shipping challenges to the surface
Deloitte RS Sector Outlook Series
The international shipping industry is experiencing significant changes. What are the biggest challenges for the industry and what are the key considerations for stakeholders to emerge stronger.
Three of the biggest challenges facing the shipping sector
The Shipping sector is experiencing significant change which presents a number of challenges;
- Supply/demand imbalance - Global fleets are continuing to grow due to orders placed in 2008 coming into the market, despite demand plateauing due to slow global growth
- Lack of liquidity - As banks are forced to curtail their lending capacity, shipping companies need to explore alternative financing options
- Increasing operating costs - Operating costs including crew wages, hull and machinery insurance, dry-docking, repairs and maintenance are on the rise.
Key considerations for owners & operators
- Increase operational efficiency, particularly around bunker management, procurement and asset utilisations
- Fix balance sheets, reduce debt where possible and divest non-core assets
- Better manage cash and working capital
- Change governance processes and transparency to make the business more attractive for financing.
Key considerations for lenders
- Refinancing through traditional bank channels will likely become more difficult as we see lenders divest their shipping interests.
- Government desire to support national industries is wavering particularly where there are other national operators to take up some of the operations and assets.
- Bondholders are likely to play an active role in any standstill or restructurings
- Divestment of traditional bank lenders could lead to opportunities for hedge funds
- The industry has begun to recognise the need for fundamental, underlying structural issues to be addressed through a proper, focused restructuring process.
About the series
The Deloitte RS Sector Outlook Series brings to the surface the sector challenges facing both UK and European companies over 2016/2017.
Working with Deloitte industry experts, we are identifying which sectors face the biggest challenges and what risks and opportunities these present for you, our clients. We also identify key characteristics and indicators to help you assess your investments.
Other reports in this series: Oil & Gas - Lower for longer