Global shipping recovery to continue behind impending acquisitions

China and the rest of Asia Pacific’s shipping demand was seen as primary driver of global shipping growth.

According to a global survey by international legal practice Norton Rose Group, the shipping sector is reporting a concerted bounce-back from the global recession, triggering a major step change in the business strategies of the world's shipping companies. A year ago, the Norton Rose Group survey showed most shipping companies were focused on retrenchment and raising more equity or debt - now, the focus is on strategic acquisitions and joint ventures.

17% of shipping respondents to the survey feel that recovery is already happening in their sector - a jump of 8% on last year. A further 14% feel it will happen in the next year. The optimism could drive a flurry of activity in the next twelve months, with 60% planning joint ventures and 58% planning strategic acquisitions. The corresponding figures from the Norton Rose Group 2009 survey were just 25% and 35% respectively.

The report, entitled the Norton Rose Group Way Ahead Transport Survey 2010, is the second annual transport report released by Norton Rose Group. It details the views of 679 international respondents from a range of companies involved in transport, including financiers, operators, manufacturers, governments and professional services firms. The respondents come from the aviation, rail and shipping sectors. There are 177 respondents from the shipping industry in total.

Other global shipping findings from the report include:

- 60% of shipping respondents feel incentives (e.g. fiscal) are most likely to trigger a sustained investment in greener transport technologies - only 22% say fines and penalties are effective.

- Only 37% feel greenhouse gas emissions should be the primary focus for regulatory action. Instead, companies involved in shipping supported anti-competitive behaviour as the overriding priority for regulatory effort, with 48% calling for action in this area.

- 34% of shipping respondents feel that investment in infrastructure is the most helpful form of government support to drive their business during the recovery. Interestingly, 21% feel that decreasing regulation is the best way governments can help shipping.

- When identifying the top three sources of financing over the next two years, shareholders/equity is the most popular option for shipping companies, chosen by 55% of respondents.

- When identifying the top three promising geographical areas for investment, many shipping respondents feel the best opportunities are in their own regional markets, though China is overall top for shipping with 58% choosing it. India comes second, chosen by 39%, with Brazil chosen by 30%.

- 68% of shipping respondents expect their passenger numbers and freight volumes to increase in the next year.

Harry Theochari, global head of transport at Norton Rose Group, commented:

"Shipping has seen a strong recovery over the last year, driven in large part by significant regional trends. Demand from China, as well as Asia Pacific more generally, has helped inject an optimism to the market that was lacking this time last year. A great deal more shipping companies identified China as a key area of investment than those from the rail or aviation sectors, showing the influence the country now has on the global shipping market.

"The reaction to that uplift from companies involved with shipping is particularly interesting. Last year there was a muted reaction towards any suggestion of growth or expansion. Now, we're seeing a lot more appetite for joint ventures and even acquisitions. That's not to say that we'll wake up tomorrow to dozens of corporate tie-ups, but the door is certainly more open to more corporate activity from shipping companies.

"The results of next year's survey will help us to identify if that optimism is long lasting"

Davide Barzilai, Partner, Norton Rose Hong Kong commented:

"As China trade continues to boom, the shipping industry is looking to Asia as a means to finance expansion from increased market liquidity. In Hong Kong, numerous enquiries have been received from shipping companies seeking to raise funds for fleet, port or other infrastructural upgrades to cope with the increased demand."