Asia/Pacific News
Fitch Ratings: Low Bunker Prices Insufficient for Recovery, 2016 Shipping Outlook Revised to Negative
Fitch Ratings (Fitch) Thursday said that bunker prices, which in some of the primary ports in recent days have plummeted to their lowest in over 11 years, along with slow steaming, idling, and the cancellation of sailings will all aid in profitability for shipping next year, but that "these measures are insufficient to lead to a protracted recovery."
"Rigorous capacity discipline along with a pick-up in demand would be necessary to reach a sustained equilibrium," it said.
As a result, the financial information services firm says it has downgraded its outlook for the shipping sector in 2016 to negative from stable in 2015.
Fitch cited "muted global trade growth and the economic slowdown in emerging markets" as a major factor in the revised outlook for shipping.
The firm further said that it expects such developments to exacerbate overcapacity woes, resulting in declining and volatile freight rates.
As others have noted, Fitch said that slowing economic growth in China is a particular risk to shipping, particularly given that the nation represents two-thirds of global iron ore imports and 20 percent of world coal imports.
Shipping capacity is set to rise 6 percent in 2016, outpacing expected growth in demand of 3 to 4.5 percent, said the firm.
Fitch noted that tanker and LNG shipping will "fare better" than industries like dry-bulk and container shipping, while larger container shippers implementing cost-containment measures are also expected to stay profitable in 2016.
In November, Ship & Bunker reported that Drewry had suggested low bunker prices were the only thing currently preventing substantial losses across the box shipping sector.
