Moody's: Benefit of Falling Bunker Prices for Box Carriers Will Fade in 2016, Global Shipping Outlook Changed to Negative

The tanker industry should be stable, but the container and dry bulks markets will continue to suffer, according to bond rater. 

International bond rating firm Moody's Investors Service says the benefit to box carriers from falling bunker prices will fade somewhat in 2016, because they have already passed lower fuel costs on to their customers via reduced freight rates.

The Average Global Bunker Price for key grade IFO380 has fallen around 60 percent over the last 12 months, according to Ship & Bunker data, and now sits at an average of a little over $200 per metric tonne (pmt) across all world ports, and at $174 pmt for the Global 4 Ports Average of Singapore, Fujairah, Rotterdam, and Houston.

The comments came as the company changed its overall outlook on the global shipping sector to negative.

Moody's expects supply growth in the industry to grow and outpace expansion of demand in 2016 by more than two percent, suppressing freight rates, particularly in the dry bulk and containership segments.

The outlook for the tanker segment remains stable as low crude oil prices will continue to boost demand for tankers, according to the report.

"Even though the tanker segment continues to perform strongly, we expect the supply-demand gap for the industry overall to exceed 2% in 2016, and possibly into 2017, as large new vessel deliveries coincide with subdued demand for dry bulk and container ships," said Marie Fischer-Sabatie, Moody's Senior Vice President.

"China's slowdown is weighing on demand for commodities, such as coal and iron ore, which in turn affects dry bulk seaborne transportation demand," she said.

As a result of weaker freight rates in the dry bulk and containership segments Moody's now forecasts a decline in earnings for the industry in the low single-digits in 2016, versus growth in the low single-digits in its previous forecast late last year.

In Februrary of 2016 Ship & Bunker reported that Moody's analysts thought Iran faced significant hurdles to boosting oil.