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Moody’s expects rated shipping companies to report 4-5% earnings before interest, tax, depreciation and amortisation growth during the next 12 months

AN IMPROVING supply-demand balance in dry bulk and container shipping amid moderate earnings growth will ensure of a stable environment for global shipping over the next 12 months, according to Moody’s Investors Services.

In its latest trade outlook, the international credit rating agency said it expects comparable earnings before interest, tax, depreciation and amortisation of rated shipping companies to increase by 4-5% organically through to the middle of next year, excluding the impact of M&A activity.

The performance of the dry bulk sector is likely to be the standout performer, according to Moody’s.

With only minimal fleet growth during the past 12 months, dry bulk demand is anticipated to outstrip supply by about 1% in 2018, a market dynamic supportive of charter rate growth.

Although Moody’s is not as positive in its outlook for the container shipping sector, the major take is that it at least looks to remain stable.

A combination of broad macroeconomic growth and trade growth will help support demand for container ships, however, the influx of new tonnage, particularly in the first half of 2018, will offset these gains leading to similar growth between supply and demand. This will hinder progress on the freight-rate side.

Developments in the dry bulk and container segments will help negate for what looks set to be another torrid 12 months for the tanker market, where the outlook remains negative with overcapacity rife and charter rates stubbornly low.

Moody’s said that significant numbers of new tanker deliveries will continue this year following 2017’s surge in supply, with crude tankers representing the lion’s share.

“The industry will take time to absorb these deliveries so charter rates are likely to stay low over the coming 12 months,” Moody’s added.

However, there are numerous challenges the shipping sector will encounter during the coming months, including geopolitical uncertainties, trade wars and rising fuel costs, which will need to be overcome.

Similarly, Moody’s said that it would consider changing its outlook to negative if there are signs “that shipping supply growth will exceed demand growth by more than 2% and that comparable Ebitda will decline by more than 5% year-over-year”.

On the flipside, it added that a positive outlook could occur “if the oversupply of vessels declines materially and comparable year-over-year Ebitda growth appears likely to exceed 10%”.