The global recession of 2008/09 hit the shipping market like a colossal wave, leaving it to navigate some pretty rough seas.
Then the storm clouds looked set to clear and the crew spoke of calmer waters – but did they speak too soon?
In some respects, yes. Shipping finance, for starters, is still suffering. Both banks and private equity funds are reluctant to lend capital for ship building, with some – like German bank NORD/LB – distancing themselves from the industry by selling off the large amount of non-performing loans they've accumulated.
The fact that shipowners were unable to scale back their purchase orders before the recession hit hasn't helped matters. The resulting two to three year gap between the acquisition and actual launch of ships created an oversupply of vessels in the market and the subsequent dip in ship construction: the first half of 2016 saw the number of ships built fall by 40% compared to the same period in 2015. The surplus has also driven down shipping rates, hitting ship owners hard as they simultaneously deal with decreased demand for raw goods and depressed economic markets around the world, with slow growth in China proving particularly challenging. With shipowners continuing to pinch those pennies, only issues in serious need of legal advice, like restructurings, are coming through to lawyers.
Contentious work did keep solicitors busy immediately after the crash, but disputes are now tailing off as the market settles and contracts are renegotiated. Work is also quieter on this front due to a dramatic drop in the number of piracy cases – although hijacking does remain a concern in the industry, with attempts off the coast of Nigeria increasing.
It seems the storm clouds will hover for a while longer, but it's also worth highlighting some areas where the sun is breaking through. One beneficial ray is the low price of oil, which continues to drop in large part because of Saudi Arabia's refusal to reduce the amount it produces.This should be a boon for shipping companies as it cuts operating costs.
Increased activity in the market may also stem from the recent $5.25 billion expansion of the Panama Canal. Its new dimensions allow larger vessels to pass between the Atlantic and Pacific oceans more efficiently. However, a few bumps and shunts in recent months suggest that the waterway may need to be expanded further to ensure smooth sailing.
Meanwhile the Asian shipping market looks set to get its time in the sun. It has continued to do well in recent years and commentators are increasingly pointing towards the region's importance in the industry. Furthermore, ship financing in Asia has bucked the global trend, with the Chinese government and banks doing a lot of lending in the region.