Moore Stephens: Leaner, Greener Shipping Will Attract Investment in 2019

Accountant and shipping adviser Moore Stephens says shipping will continue to attract investors in 2019 if it fulfills its ESG (environmental, social and governance) responsibilities.

In the latest issue of Bottom Line, the Moore Stephens shipping sector newsletter, Richard Greiner, a partner in the firm’s Shipping & Transport team, says, “It has been suggested that the future is very much like the present, only longer. Should that prove to be the case for the shipping industry, it would not be such a bad thing, since the present is not so bad as it has appeared to be at various times over the past ten years.

“Confidence in the shipping industry actually dipped slightly towards the end of last year, but that was against a four-year high recorded in first-half 2018. There remains an appetite for investment in shipping from both new and existing players. That is likely to continue in 2019 so long as shipping lives up to its ESG responsibilities.

“Existing and emerging regulations such as those on ballast water management and greenhouse gas emissions show that shipping is becoming more environmentally aware and accountable. New funds will be needed and the environmental investment story should prove attractive to many potential investors. Green doesn’t come cheap, or easy, however, the more so when viewed in the context of rising interest rates. This year we will see important decisions made on investments to comply with the new environment-driven regulations which are coming into force, and we will have a better idea of whether the drydocking capacity exists to cope with demand.

“Meanwhile, the industry will face other challenges. Operating costs are set to increase, and hopes will persist that freight rates will do likewise. Tonnage imbalances will endure in some trades. The Baltic Dry Index may behave less erratically than in the latter part of last year. Brexit may finally mean Brexit, which could mean a number of things, but should prove positive for shipping in the UK. The introduction of new lease accounting standards will change things for some, though not their actual cashflows. And, last but not least, the effect of geopolitical influences will continue to be felt throughout 2019.

“Despite the prospect of new trade negotiations between China and the US, the world remains a volatile stage on which to trade. There are presidential elections this year in a number of countries, including Argentina, Indonesia, Nigeria and Panama. Additionally there are a plethora of parliamentary elections over the coming year in, among others, Greece, India, North Korea, at least a dozen African nations and perhaps even in the United Kingdom.

“Uncertainty is likely to remain the norm in 2019.”