The global shipping industry will be sailing in rough waters over the next 12 to 18 months, as the supply of vessels will continue to outstrip demand, predicts Moody’s Investors Service in its latest Industry Outlook on the sector published recently.
The global shipping industry’s outlook has been negative since July 2011, the international credit rating provider said in a statement.
“Substantial oversupply will constrain freight rates for at least the next 18 months, particularly weighing on earnings in the dry-bulk and crude oil tanker segments, while falling US crude oil imports and declining European demand are likely to depress seaborne deliveries,” said Marco Vetulli, a vice president-senior credit officer in Moody’s Corporate Finance Group and author of the report, entitled “Global Shipping Industry: Sustained Oversupply Keeps Outlook Negative.”
He expects the total EBITDA (earnings before interest, taxes, depreciation, and amortization) in the global shipping industry to decline by around 5 percent to 10 percent in 2013.
In container shipping, Moody’s does not expect to see a major improvement in financial performance this year, as it is the most sensitive to bunker fuel costs, which remain high. But it said the segment could outperform other shipping sectors this year if it maintains market discipline through vessel layups to reduce supply and control costs.
Rated Japanese conglomerates Nippon Yusen Kabushiki Kaisha and Mitsui O.S.K. Lines are better positioned to ride out choppy conditions because they have healthy liquidity, benefit from solid relationships with banks, and are part of large groups, Moody’s said.
Market prospects are expected to improve in 2014 as the amount of oversupply declines. “However, downside risks remain high as the global economic recovery appears to have lost momentum in recent months,” Moody’s said.
Photo: Rennett Stowe