The global shipping industry will see earnings worsen, while freight rates will remain depressed amid ample supply, according to projections from the credit rating agency Moody’s Investors Service.
Moody’s Investors Service’s outlook for the global shipping industry over the next 12-18 months is negative, reflecting its expectation that earnings will worsen and freight rates will remain depressed amid ample supply, Mariko Semetko, a Moody’s Vice President and Senior Analyst explained.
“We expect that the aggregate EBITDA of Moody’s-rated shipping companies will fall by 7 percent-10 percent in 2016,” Semetko added. “Such a result is much worse than the low-single-digit percentage decline we forecast in March 2016, when we changed our outlook for the industry to negative from stable.”
Moody’s report, “Shipping Global: Low Freight Rates and EBITDA Decline Drive Negative Outlook,” said conditions will remain weak for the dry bulk segment and expects the segment’s demand to remain subdued in 2016 and at a similar level to 2015, as China’s slowdown continues to weigh on demand for commodities.
The report also noted that companies operating in the container shipping segment have been affected by very weak freight rates since late last year. Moody’s does not anticipate material rate increases over the foreseeable future.
In addition, the report attributed the segment’s freight rate decline to companies passing on the drop in fuel prices to their customers, along with the oversupply in the market, in which companies order larger, more cost-efficient ships.
Moody’s projects the current supply-demand imbalance in the container shipping segment will continue to persist over the coming 12-18 months. In regards to the tanker segment, Moody’s noted supply growth will be large in 2016-2017, driven by a heavier delivery schedule.
“This segment will see falls in freight rates and EBITDA in 2016,” Moody’s said. “Freight rates nonetheless will be above medium term averages, because oil prices are still low and structural shifts related to refinery locations continue to support demand.”
Moody’s holds negative outlook for global shipping industry
