Shipping Industry Outlook Appears Stable: Moody's

Moody's says the outlook for the global shipping industry is stable.

A new report issued by Moody's Japan K.K. (Moody's) Wednesday suggests that, with signs of recovery in both the dry bulk and container shipping segments, the outlook for the global shipping industry is stable, Malaysian media reports.

Moody's says that, different from 2016, which saw double-digit decline in EBITDAs, the operating environment has bottomed out, with earnings now set to remain stable, although low throughout the year.

"Market conditions are still weak, but are unlikely to worsen from the levels seen for both segments in 2016, and we expect that supply growth will exceed demand growth by less than 2 percent, or within our parameter for a stable view," said Moody’s in the report, noting that freight rates in the dry bulk and box ship segments will gradually increase."

While Moody's suggests positive developments are ahead for the dry bulk and container segments, the company's outlook for the tanker segment was significantly less hopeful as the agency pointed toward high supply and low freight rates for predicted negative market conditions.

"Namely, the segment faces very high levels of scheduled deliveries for 2017 and 2018, a credit-negative development because it will keep freight rates low over the coming 12 months," said Moody's.

Overall, Moody's says it would consider changing its outlook for the shipping industry back to negative if it observes indications that shipping supply growth will exceed demand growth by more than 2 percent, or aggregate EBITDA will slide by more than 5 percent year on year.

"Downside risks remain high," said Moody's, adding: "conversely, we would consider a positive outlook if the oversupply of vessels declines materially and aggregate year-over-year EBITDA growth appears likely to exceed 10 percent."