The world's biggest shipbroker, Clarksons, issued a trading update today that adds to the gloom pervading the global maritime economy. In its update of 4th July 2016 the company warned that conditions means it had to revise down expected profits for 2016.
"Since the AGM, the Clarksea index has fallen a further 10%, so that its average level for the first six months of 2016 was 30% lower than for the first half of 2015. The Baltic Dry Index has similarly fallen sharply year on year, testing all-time lows during the first quarter of 2016. This deterioration in freight rates reflects the increase in global economic uncertainty and the continuing imbalance between supply and demand in shipping and offshore."
Despite a recent recovery in the oil price which returned activity within offshore broking, Clarkson's said the offshore industry "remains depressed and will require this recovery to be sustained for some time before confidence returns and meaningful volumes start to come through."
Although overall volumes of transactions had continued to grow, the fall in freight rates and assett values had had a negative effect on revenues and had 'driven the market to be spot focussed'. There had also been little newbuilding activity. Quiet capital markets and weak investor confidence had contributed to a reduction in activity in the financial division.
And although a strenghtening dollar against the pound, if sustained may help with profits, the company concluded that the challenges as outlined above meant that profits for 2016 will be "materially lower than the full year 2015".
The Clarksons business does however remain highly robust, evidenced by the significant growth in volumes within broking, sales growth in research, an encouraging mandate pipeline within the financial division and a strong balance sheet.
The Group said it will release its interim results for the six months ending 30 June 2016 on Monday 15 August 2016.
Clarksons intervention comes amids a tsunami of bad news in tanker, container and bulk shipping coupled with a huge downturn in shipbuilding, especially in Asia and China where shipyards a fighting tooth and nail for survival now.
Clarksons gave no indication that the decision by the British public to leave the EU had had any impact.
Clarkson's share's tumbled today by over 15% at the time of publication.