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Global Credit Research - 22 Jun 2016
Tokyo, June 22, 2016 -- Moody's Japan K.K. says that its outlook for the global
shipping industry over the next 12-18 months is negative.
"The negative outlook reflects our expectation that earnings will
worsen, with freight rates likely to remain depressed amid ample
supply," says Mariko Semetko, a Moody's Vice President
and Senior Analyst.
"We expect that the aggregate EBITDA of Moody's-rated
shipping companies will fall by 7%-10% in 2016,"
adds Semetko. "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 analysis is contained in its just-released report
titled "Shipping Global: Low Freight Rates and EBITDA Decline Drive
Moody's report says that conditions will remain weak for the dry
bulk segment. In particular, freight rates are very low,
despite the fact that the high levels of cancellations and scrappings
will keep the gap between supply growth and demand growth narrow.
Moody's points out that the Baltic Dry Index remains at low levels,
although has somewhat improved from a historic low of 290 in February
Moody's expects demand in the dry bulk segment to remain subdued
in 2016 and at a similar level to 2015, as China's slowdown continues
to weigh on demand for commodities. At the same time, a large
amount of new vessel deliveries are planned for 2016.
On the container shipping segment, Moody's report says that
companies operating in this segment have been affected by very weak freight
rates since late 2015 and Moody's does not foresee material rate
increases over the foreseeable future.
Moody's says that while the decline in freight rates for the container
shipping segment can be partly attributed to companies passing on the
drop in fuel prices to their customers, it is also a consequence
of ongoing oversupply in the market, in which companies order larger,
more cost-efficient vessels.
As for the current supply-demand imbalance in the container shipping
segment, Moody's says the situation will persist over the
coming 12-18 months. Moody's projects that supply
growth will outpace demand growth by more than 2% in 2016,
and keep freight rates low. If bunker fuel prices increase materially,
the segment's profitability will likely come under further pressure.
In relation to the tanker segment, Moody's says that supply
growth will be large during 2016-2017, due to a heavier delivery
schedule. As a result, Moody's views on the segment
have become more subdued when compared with its stance in 2015.
Moody's says this segment will see falls in freight rates and EBITDA
in 2016. 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.
The report points out that Moody's will consider changing the outlook
for the global shipping industry back to stable if shipping supply growth
exceeds demand growth by less than 2%, or demand growth exceeds
supply growth by up to 2%, and if aggregate EBITDA growth
is within a range of -5% to +10% year-over-year.
Moody's will consider a positive outlook for the global shipping
industry if the oversupply of vessels declines materially and the aggregate
year-over-year EBITDA growth for companies that Moody's
rates appears likely to exceed 10%.
Subscribers can access the report at:
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Vice President - Senior Analyst
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Associate Managing Director
Corporate Finance Group
Moody's: Global shipping industry's negative outlook due to fall in EBITDA
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
No Related Data.
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