Fitch: EMEA Shipping Fundamentals to Improve

By MarEx 2014-12-05 08:59:00

Fitch Ratings has revised the EMEA shipping sector outlook to stable for 2015, from negative for 2014, due to expected modest improvement in sector fundamentals, albeit against a backdrop of persistent oversupply and volatility in rates.

In a newly published report, Fitch says performance will vary across segments with tanker, and, to a lesser extent, dry-bulk shipping demonstrating moderate improvements, the LNG and offshore segments maintaining their sound performance, and container shipping remaining under pressure.

Fitch expects that overcapacity will remain the key factor underlying the shipping sector's weakness in 2015, although to a varying degree, depending on the segment. In addition, Fitch expects weak supply/demand fundamentals in container shipping in 2015 as capacity expansion is likely to continue to outstrip demand growth, but forecast a visible improvement in the supply/demand balance in tanker shipping.

Freight rates are expected to remain volatile across all shipping segments. "We forecast that container freight rates will remain weak in 2015, but we expect a recovery in tanker rates, supported by moderating supply growth and growing oil consumption," Fitch stated.

Fitch stated that rigorous cost management along with the recovery in some segments to support an improvement in shipping companies' financial profiles in 2015 is expected. An expected moderation in bunker prices and continued slow steaming will also contribute to cost reductions.

Shipping companies that manage to achieve an operating profit are likely to improve their credit metrics in 2015. However, it is forecasted that leverage ratios will remain high, keeping the companies' creditworthiness in line with low and mid-level speculative-grade ratings.