Moody’s issued a stable outlook for the shipping industry for 2019, with operating earnings set to grow at the highest rate in four years.
But the industry still has to cope with the risks of rising global trade barriers and the industry’s wholesale switch to low-sulfur fuel.
The credit rating agency said the stable outlook “reflects our view that supply and demand will remain broadly balanced in key shipping segments and that the aggregate EBITDA (earnings before interest, taxes, depreciation and amortization) of the global rated shipping industry will increase significantly over the next 12 to 18 months, although from a low base in 2018.”
Overall, Moody’s expects EBITDA to rise between 16 percent and 18 percent for 2019.
The picture for 2019 is balanced with “supply and demand to grow at about the same pace for the year as a whole, aided by a moderate delivery schedule and likely slow steaming, possible scrapping activity and vessels docked for scrubber installations.”
In container shipping, fleet capacity of just over 22 million twenty-foot equivalent unit (TEU) is expected to grow 3 percent 22.587 million TEU.
Moody’s said container shipping is benefitting from a relatively small orderbook. This year, only 797,000 TEU of newbuilds are expected to be delivered. This compares to 1.2 million TEU in 2017 and 1.3 million TEU in 2018.
“Limited supply is also likely to be helped by a number of vessels being taken out of service to install scrubbers as well as possible slow steaming to optimize the use of more expensive low sulphur fuel required by the IMO 2020 regulation,” Moody’s said.
Large containerships still remain in favor with liner operators. Moody’s said 64 percent of new orders consisted of very large container vessels (VLCV) and ultra large container vessels (ULCV) of over 12,500 TEU.
For the ULCV vessels of over 18,000 TEU, the orderbook stood at 51.7 percent in April 2019, Moody’s said.
“With the rise in oil prices leading to rises in bunker costs and potential future increases resulting from IMO 2020, large vessels will again become more efficient in operation.”
Demand growth is still expected in the 2 percent range. The demand growth outlook reflects reduced expectations for global gross domestic product and trade, coupled with the expanding effects of U.S and Chinese tariffs.
Moody’s said the U.S. and Chinese tariffs “are an area of significant concern since many containerized goods will be affected.”
Despite the disruption from tariffs, importers are looking for alternative sources of goods, Moody’s said.
“While substitutions may involve changes in some trade lanes, the overall volume of containerized trade is likely to grow over the longer term,” it added.
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