Dr Adam Kent, director of UK-based markets forecaster Maritime Strategies International (MSI), finds himself a busy man – downturns tend to be good for his business.

MSI typically experiences a strong inverse relationship between the number of enquiries and the state of the freight market.

“When markets are strong owners are not as interested in understanding how and when they could earn a little more and financiers are not as concerned with market risk exposure. When markets soften the reverse is usually true,” Kent says.

Kent reckons the state of global shipbuilding has changed ship cycles forever.

Even if yards are wound down or are mothballed the general infrastructure tends to remain in place, he points out. The consequence to shipping is that the moment any single sector shows sustained improvement owners will be able to place orders at these underemployed shipyards, which will be hungry for new contracts, and these orders could easily be delivered in relatively short window, therefore curtailing any sustained market improvement.

“This paves the way for shipping market cycles to become shorter with lower peaks, as shipyard capacity no longer presents a limiting factor to timely provision of new supply,” Kent predicts.

The MSI excecutive thinks that the shake up going on at the moment among South Korean shipyards is long overdue. The industry was offered a lifeline in the form of huge numbers of offshore contracts that were placed during 2011-13.

“These offshore orders have, to some extent, been partially responsible for the treacherous financial position most of the Korean yards are now battling, given the low – or no – profit margins they provided,” says Kent.

Shipping investors have changed in character tremendously over the past few years, Kent observes.

“At the start of the decade investors wanted to enter shipping sectors which exhibited high liquidity, high visibility and a clear route for an exit strategy, today the reverse is true with investors looking to target sectors with high barriers of entry in a bid to protect their investments,” he says

MSI is forecasting demand growth in dry bulk to increase year-on-year until 2018 and, apart from 30 VLOC orders, there have been virtually no dry bulk contracts placed during 2016, while at the same time demolition volumes have been high.

“Once the current orderbook has hit the water the prospects for the sector should begin to improve, narrowing the current imbalance between demand and supply,” Kent reckons. He cautions however that with the capesize sector so reliant on the fortunes of China and with the peak in iron ore trade a distinct possibility within the next five years, the over capacity of the largest vessels will continue to be “an area of concern” for dry bulk shipping.

On ship finance, Kent notes that it has become increasingly difficult for smaller owners to secure new bank debt or to refinance existing facilities. The primary reasons for this are higher levels of non-performing loans, for which banks have had to make provision, coupled with having a more stringent regulatory framework. Banks that are still able to lend will therefore prefer to finance larger corporates where there is a potential for higher fees and cross-selling products. This is certainly the message MSI has heard from a range of banks, with many now only targeting the top 10 to 20 owners.

“This, of course, leaves a very long tail of shipowners that are currently struggling to find debt from traditional shipping lenders and are having to be more resourceful,” Kent concludes.