• ITVI.USA
    15,845.180
    -15.980
    -0.1%
  • OTLT.USA
    2.806
    0.013
    0.5%
  • OTRI.USA
    21.590
    0.130
    0.6%
  • OTVI.USA
    15,846.760
    -20.840
    -0.1%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,845.180
    -15.980
    -0.1%
  • OTLT.USA
    2.806
    0.013
    0.5%
  • OTRI.USA
    21.590
    0.130
    0.6%
  • OTVI.USA
    15,846.760
    -20.840
    -0.1%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American Shipper

Moody’s concerned about shipping overcapacity

Moody’s concerned about shipping overcapacity

   Moody’s Investors Service said Tuesday it has revised its outlook for the global shipping industry from neutral to negative, saying that while the dry bulk sector is most vulnerable in 2011, it also believes the tanker market faces challenges and the container segment could deteriorate in 2012.

   “Even though the demand for shipping services is likely to remain solid in 2011, underpinned by positive trends in world trade, we believe industry conditions will deteriorate over the next 12-18 months, primarily because of a continuing oversupply of vessels,” the report said.

   The rating house said the dry bulk segment is likely to be the hardest hit this year because of a large order book equal to 46 percent of the tonnage on the water, with 80 percent of those ships due for delivery in 2011 and 2012.

   That, it predicts, will create supply/demand imbalance that will continue to depress freight rates. Carriers with large numbers of ships on spot charter are likely to be most vulnerable to lower rates than firms with long-term contracts.

   The tanker market, Moody’s said, has been weak for two years and it doesn't anticipate a sustained recovery until the second half of 2012.

   The 2009 economic recession resulted in reduced demand for oil, and some ships were used for floating storage. Demand recovered in 2010, but then many of the ships that had been used for storage re-entered the market in the second half of last year causing continued weakness.

   In the first quarter of 2011, major tanker companies either reported losses or deteriorating performance, Moody’s said.

   Despite an increase in ton-mile demand because of increased purchases from China, scrapping of tankers, and postponed or canceled orders for new tankers, Moody’s said, “we expect supply to outweigh demand for most, if not all, of 2012.”

   Ton-mile demand will rise 7 percent to 9 percent in 2011 while the fleet is estimated to grow 51 million tons this year, equal to a 13 percent expansion of the global tanker fleet, 10 percent after postponements and cancellations. So supply will still outstrip demand.

   One bright spot is slow steaming, which was pioneered by Maersk Tankers and has been taken up by most tanker companies according to Moody’s.

   While the container sector “performed reasonably well” in the first quarter of 2011, Moody’s said, “freight rates declined in the second quarter of 2011 because almost half of the new vessels scheduled for delivery during this year were delivered during the quarter. Although demand is not declining, it is insufficient to absorb all of the new capacity entering the market.”

   But it added because of an uneven delivery of new ships, “freight rates are declining rather than collapsing, as occurred in the first half of 2009, when oversupply converged with a sharp drop in demand.”

   Longer term, Moody’s suggests “the container-shipping segment is entering a more mature phase in its life cycle, characterized by lower growth rates.”

   Such an environment calls for a slowdown in capital expenditure, it argues. Instead, there was been an increase in the order book for new containerships: up 8.3 percent from 3.7 million TEUs on Jan. 31 to ships with aggregate capacity of 4 million TEUs at the end of May.

   Moody's said that while Japanese shipping conglomerates it rates, MOL and NYK, “are facing the same challenges as other global-shipping companies (oversupply, weak freight rates and an increase in fuel costs), we believe that they are being affected to a lesser degree by these negative trends. This is because Japanese conglomerates' large scale, diversification, long-term contracts and strong relationships with customers act as mitigating factors.” ' Chris Dupin

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