FRANKFURT (S&P Global Ratings) - S&P Global Ratings believes that, in 2018, demand in the three main segments of the global shipping industry (dry bulk, tankers, and containers) will outstrip supply for the first time in several years.
“The lighter new vessel delivery schedule for 2018, compared with 2017, combined with our expectation of sustained imports of commodities, and longer distances traveled, point to rising charter rates across shipping industry this year—with the exception of container liner segment, which, we forecast, will see flat to slightly negative growth in rates,” said S&P Global Ratings credit analyst Izabela Listowska. “What’s more, given the fundamental improvement in supply conditions, as signified by ship orderbooks being at all-time lows, we think recovery in shipping rates could continue beyond 2018.”
We therefore expect industry conditions to strengthen in 2018 for the most of 17 shipping companies we rate globally.
However, we see a risk that vessel owners, renowned in the industry for their historically poor supply discipline, could embark on an ordering spree in anticipation of better times ahead. This would disrupt the encouraging supply trend and constrain charter rates. But, assuming a typical lead-time from ship ordering to delivery of 18-24 months, we expect a slowdown in supply growth for at least the next few quarters, regardless of ordering activity.
Sustained global demand for commodities is essential for further improvement of dry-bulk shipping rates. For product tankers, we forecast a cyclical upturn in rates following soft rates in 2017, as the new vessel delivery schedule for this year is close to historical lows. In contrast, we forecast flat to slightly negative growth in freight rates in 2018 for container liners, given uncertainties about their maintenance of supply discipline.
While in our base case we assume no major glitches on the demand side—underpinned by our firm 2018-2019 GDP growth forecast for all major contributors to global trade volumes, especially China, but also the eurozone and the U.S.—all eyes are on the supply side and orderbooks, which will essentially shape the shipping industry beyond the likely solid 2018. If owners refrain from aggressive ordering and supply tightens further, we could see momentum in charter rates continuing into 2019.
Only a rating committee may determine a rating action and this report does not constitute a rating action.