The outlook for the global shipping sector for the next 12 months remains stable on the back of expected supply-demand improvements in the container and dry bulk shipping segments and overall sector earnings growth of 4-5%, said Moody's Investors Service in a report published today (18 June).
“Demand will slightly outstrip supply in the dry bulk segment, while supply and demand are likely to be pretty evenly matched in the container shipping segment. This, combined with our expectation of 4-5% organic earnings growth in the next 12 months underpin our stable outlook on the global shipping sector, despite continued oversupply in the tanker segment,” said Moody’s vice president, senior analyst Maria Maslovsky.
But she added “Recent US tariff announcements targeting steel and aluminium imports from certain countries and potential retaliatory action pose downside risks to the global shipping sector.”
The report said Moody’s expected supply and demand to grow at about the same pace for the year as a whole, although the new vessel delivery schedule is front-loaded. Freight rate developments in Q2 2018 will be key to the companies’ profitability.
High supply growth, especially in the first half of 2018, “will likely prevent significant further increases in freight rates”, the report added.
In 2017, the rate of postponements and cancellations of new vessel deliveries declined to about 31.1% from 39.7% in 2016, while scrapping activity decreased to 2.1% of the fleet from 3.2% of the fleet for 2016.
“Both of these trends contribute to supply growth,” the report said, adding “More positively, the percentage of the fleet that was idle increased to close to 3% at the end of 2017 from under 2% earlier in the year. An increase in idling reduces the current trading fleet; however, a material amount of idle vessels could slow down recovery as they return to trading.”