Global shipping companies expect to invest more this year and next, on the back of continuous expansion of global trade.

The World Trade Organization (WTO) forecasts that merchandise trade will grow 4.4 percent year-on-year in 2018, after expanding 4.7 percent in 2017. Growth is forecast to reach 4.0 percent in 2019, it said.

This is consistent with the results of the latest Shipping Confidence Survey conducted by international accountant and shipping adviser Moore Stephens which revealed that confidence among ship owners reached the highest level in four years.

Results of the survey show that the confidence index among respondents—ship owners, managers, charterers and brokers—improved to 6.4 in a scale of 0 to 10 in February 2018, from just 6.2 in November 2017 when the previous survey was undertaken.

Ship owners were mostly bullish, with a confidence level of 6.6 in February 2018, an improvement from 6.4 in November 2017. This also represented the highest confidence level among ship owners in four years, according to Moore Stephens. Confidence among ship managers’ likewise climbed to 6.4 in February 2018 from 6.1 in November 2017

However, charterers and brokers were less enthusiastic, with their confidence scores dropping to 5.0 in February 2018 from 7.7 in November 2017 and to 6.1 from 6.3 during the same period, respectively.

Results of the survey also point to expectations that shipping executives will invest more in the sector over the next 12 months. Investment expectation among the respondents increased to 5.5 in February 2018 from 5.3 in November 2017. This was also the highest investment expectation score since May 2014.

In particular, the investment expectation among charterers advanced to 6.8 in February 2017 from 6.2 in November 2018, while investment expectation among managers surged to 5.6 percent, from 5.3 during the same period.

Among regions, Asia manifested the highest investment expectation with a score of 5.8 in February 2018, significantly up from 5.0 in November 2017.

Richard Greiner, a partner at Moore Stephens, said that while the shipping industry remained volatile, the survey findings pointing to a four-year high confidence level among ship owners should be treated as positive news.

Greiner also described as encouraging the survey results pointing to the higher investment expectation of shipping executives over the next 12 months. However, he said financing costs could be more difficult to tap, with 64 percent of respondents in the February 2018 survey believing that finance costs would likely rise in the months ahead, up from 59 percent in November 2017.

In terms of the sources of growth, respondents listed demand, competition and finance costs as the top factors that would likely affect the performance of the shipping sector over the next 12 months.

The rising confidence among shipping executives is also evident in the Philippines, which plays a significant role as a major provider of manpower. More than 400,000 Filipino seafarers are aboard vessels at any given time, or about a quarter of the 1.2 million people working on ships.

The local shipping industry is working on inviting prospective partners and investors to strengthen the industry as a whole. The Philippines is known as a source of competent workforce across industries, including shipping. Aside from this, the strategic maritime location of the country means that it is an attractive site for shipping investments.

The Philippines is one of the world’s largest ship manufacturers in the world, with the country being responsible for around 1.3 percent of global shipping exports and 2.8 percent of total completed ships internationally in 2015.

The Philippines hosts some of the world’s largest shipbuilders, including Hanjin Heavy Industries and Construction Philippines in Subic Bay; Tsuneishi Heavy Industries (Cebu), Inc. in Balamban, Cebu; and Keppel Philippines in Bauan, Batangas.

A study by the United States Agency for International Development (USAID) shows that shipbuilding has been contributing a lot to the Philippine economy since the early 1990s. The industry contributed US$1.5 billion or 2.6 percent of total Philippine exports in 2015.

The rise of electronic commerce, along with the growth of global trade, drives the growth of the shipping and logistics industry, which caught the interest of several Philippine companies. Among these companies are Chelsea Logistics Corp. of Davao City-based businessman Dennis Uy, which recently acquired a substantial stake in 2GO Group Inc. and conglomerate Metro Pacific Investments Corp. (MPIC), which plans to buy more logistic companies after acquiring stakes in Basic Logistics and Ace Logistics.

Investing in shipping and logistics also offers companies an opportunity to participate in the expansion of global trade, as markets become more unified and tariff rates decline. The Department of Trade and Industry (DTI), through its export marketing arm Center for International Trade Expositions and Missions (CITEM), has been finding ways to boost the local shipping industry.

CITEM has recently participated in the 15th Asia Pacific Maritime Convention at Marina Bay Sands, Singapore to look for growth opportunities for the local shipping industry.

A process expert in a shipping company, however, said the industry faces several challenges. “As far as I’m aware there has been an ongoing price war with shipping industries that are hurting the growth of these companies, thereby limiting their income because of the lower freight prices,” he said.

“With limited funds, it’s going to be harder to expand faster than normal which makes investors worried because a slow growing industry is just going to bring stock prices and interest down,” he said.

Sonny Labrador, a retired messman, thinks otherwise, saying the outlook for the industry remained positive amid the strong economic growth which is mainly influenced by the movement of goods and people where the shipping industry plays a crucial role.

The Philippines’ fast growing economy with a gross domestic product (GDP) growth of 6 percent to 7 percent annually is seen as the biggest opportunity for the local shipping industry. The country’s GDP expanded 6.7 percent in 2017 and 6.8 percent in the first quarter of 2018, according to the Philippine Statistics Authority (PSA).

The World Bank and the International Monetary Fund (IMF) predicted an annual growth rate of at least 6 percent for the Philippines over the medium term, referring to the next three to five years. This robust economic growth is expected to encourage continuous investments in the shipping industry.

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