Credit rating agency Moody’s has given the global shipping industry a stable outlook for the next 12 to 18 months.
“Moody’s-rated shipping companies should report aggregate year-over-year EBITDA [earnings before interest, taxes, depreciation, and amortization] growth of around 5%-7% over the next 12 to 18 months. Our expectation indicates a stable outlook for the industry over the same period,” said Mariko Semetko, a vice president and senior analyst of the company.
“Despite weak freight rates, EBITDA growth will be supported by continued operating efficiencies and cost reductions; the latter we expect will be driven largely by low fuel prices,” added Semetko.
The analysis is contained in its just-released report titled “Shipping—Global: Stable Outlook Reflects Modest EBITDA Growth as Costs Decline,” and is authored by Semetko.
It pointed out that fuel accounts for a large portion of shipping company expenses and is therefore a key driver of earnings. For example, fuel accounts for about a quarter of the shipping expenses for Nippon Yusen Kaisha, Mitsui O.S.K. Lines, and Kawasaki Kisen Kaisha.
The report said bunker prices should stay low in 2015 and rise only modestly in 2016, given the ongoing weakness in crude oil prices and the correlation between crude and bunker prices.
The report added that while all four main shipping segments—dry bulk, crude oil tankers, product tankers, and containers—carry stable outlooks, not all four will exhibit equal levels of supply-demand imbalance. Moody’s is more positive about the outlook for the tanker segment and least positive about the outlook for the dry bulk segment.
The downside risks for the industry as a whole remain high. “Moody’s would consider changing the outlook for the industry back to negative if there are signs that shipping supply growth will exceed demand growth by more than 2%, or that aggregate EBITDA will fall by more than 5% year-over-year,” said the analysis.
On the other hand, it would consider changing the outlook to positive if the oversupply situation for vessels improves and aggregate year-over-year EBITDA growth appears likely to exceed 10%.
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