Container shipping can look forward to healthy but slower volume growth in 2019 even as the overall global shipping sector’s outlook remains negative, reflecting the demand-side risks of protectionism and slower economic growth, Fitch Ratings says.
Higher fuel costs and sulfur regulation will also put pressure on carriers, it added. Partly offsetting an unfavorable environment are emerging signs of better capacity management by shipping companies, which is key to a sustainable balance and freight rates that support consistent profitability.
“We expect better fundamentals in container and dry bulk, while capacity growth will weigh on tankers. The key risk to shipping is an escalation of protectionist measures that would damage global trade and GDP growth,” said the international credit rating agency.
Free global trade is vital for shipping development as about 80% of world trade in goods is carried by ships. More stringent fuel regulations regarding sulfur content could significantly increase operating costs and capex requirements in all shipping segments. This may negatively affect financials unless shipping lines pass these costs to customers. However, the product tanker market may benefit from these regulations as seaborne trade of low sulfur fuel is likely to increase as a result.
“We expect healthy, albeit slower volume growth, in 2019 in container shipping. But supply and demand should be more balanced as fewer new vessels come onto the market. This should provide support to freight rates,” said Fitch Ratings.
It also observed how container shipping has become more consolidated with the top five players accounting for 63% of the market in 2018 compared to only 31% in 2000, which is beginning to help with coordinated capacity deployment.
