Asia-Pacific seaports are expected to bear the brunt of the cooling down of economies in the region, Standard and Poor’s Ratings Services (S&P) said in a new report.
In its “Asia-Pacific Sector Outlook 4Q 2016: Net Negative Outlook Bias Rises to 13 percent from 11 percent,” S&P said that port operators across the region face the strongest headwind with softening gross domestic product (GDP) growth.
In the short term, the report added, ports are expecting potential impact from the recent bankruptcy filing of South Korean container carrier Hanjin Shipping.
S&P said shipping ports are faring the worst because of weak volume growth.
“Ports dedicated to commodity trades could benefit from the recent rebound of coal prices although this would reduce the downside risk rather than providing true upside,” S&P said.
It added that it expects business conditions for other transportation subsectors such as road, airport, and rail to remain broadly stable with some potential upside for rail operators exposed to commodity prices.
It warned, however, that for the ports subsector, the situation is more about “reducing downside risks.”
In emerging Asia, the main risk “is a material slowdown since investments continue to be high and lumpy, with assets having limited ability to adjust,” said the financial services company.
“The second risk is the tightening in credit markets as a result, which would further stretch balance sheets as earnings weaken,” it added.
Additionally, container shipping is grappling with overcapacity, which is weighing on earnings despite the recent bankruptcy of Hanjin.
S&P added that container shipping freight has been weak due to stagnant economies and persisting capacity pressure, which prompted consolidation and alliances among key global players.
“We expect container operators to remain under strong earnings pressure even after Hanjin Shipping’s filing for court protection,” it added.
Photo: Emperor Genius
