Shipping report warns of credit risks – posted on*: 31 May, 2013
Three emerging trends: falling US oil imports, the return of some manufacturing capacity to rich industrialised nations and advances in vessel design, could significantly change the competitive landscape for global shipping companies and affect their creditworthiness over the next five years, says Moody’s Investors Service in a recent report.
‘The credit impact arising from each of these trends is likely to vary according to industry segment, crude oil tankers, containers and dry bulk, creating the potential for a few winners and many losers, ’ says Marco Vetulli, a vice president – senior credit officer in Moody’s Corporate Finance Group and author of the report. ‘Rated companies adversely affected by these trends that do not proactively manage these risks are likely to face rising operating and financial pressures that could eventually hurt their ratings.’
Moody’s notes that the ongoing shift in trade patterns owing to falling US oil imports has credit-negative implications for the entire tanker industry as it is likely to depress freight rates. Crude oil tanker companies that operate large fleets of the types of vessels typically used on long-haul routes are the most vulnerable. Companies that operate smaller, more flexible tankers are likely to fare better.
The partial reshoring of manufacturing capacity back to rich industrialised nations and rising income levels in Asia are altering patterns in the trade of semi-finished products, with credit implications mainly for the container segment. Moody’s expects that companies with operations on Asia to US trade routes could be adversely affected as transportation volumes on these routes are likely to fall. Furthermore, such companies might need to rebalance some of their capacity from long-haul trade to smaller vessels more suited to intra-Asia trade. Conversely, companies that already operate mainly on intra-Asia routes are likely to benefit from the increase in cargoes.
Tightening environmental regulations and high fuel costs are strong incentives for shipowners to invest in the new generation of ‘greener’ vessels to cut operating expenses, but the lack of financing is a constraint. Although this trend is common to all shipping sectors, it represents a particular challenge for the dry bulk industry, where the average fleet age is quite high and the current financial condition of most players is fairly weak. However, Moody’s would expect young and efficient fleets to be less adversely affected.
*Posted in: Shipping World & Shipbuilder
