Ratings agency Fitch has revised its outlook for global shipping to negative for 2016, from stable for 2014, predicting weaker demand from slowing trade and an economic slowdown in emerging markets that will exacerbate overcapacity, leading to declining and volatile freight rates.
Prospects are better for tankers and for LNG carriers, which will perform “soundly” in the coming year, Fitch predicts. However, container shipping and dry bulk will remain under pressure. “The rating outlooks for the rated shipping portfolio are stable, with positive rating momentum possible for tanker shipping companies,” it said.
Fitch noted that although the World Trade Organisation (WTO) has forecast world trade volume growth of 3.9 per cent next year, up from a forecast 2.8 per cent this year, next year’s estimate is “still below the 20-year average of 5 per cent with a risk on the downside”.
The report highlighted the twin threats of slowing growth in China, posing “significant risks” to shipping and “persistent” overcapacity “to remain the key factor blighting the shipping sector’s recovery prospects”.
However it also said that lower bunker prices will contribute to cost cutting next year and that companies will seek to boost their results with slow steaming, layups and cancelled sailings.
“We believe these measures are insufficient to lead to a protracted recovery in the sector,” the report concluded. “…We expect larger container-shipping companies that successfully implemented cost-containment measures to remain profitable in 2016. In contrast, we anticipate the financials of smaller, unrated, especially dry bulk shippers to remain stretched, which will probably lead to more bankruptcies.”