The shipping industry faces a challenging time going forward, as fears grow about the end of the commodity super-cycle due to a slowdown in global growth in general, and China’s in particular, says Debtwire Analytics.
The firm reports that substantial overcapacity in some sectors, especially dry bulk, combined with intense competition, has put pressure on freight rates and forced companies to reassess their operating models and cost structures.
With many companies highly leveraged as a result of taking on excessive debt over the previous years, their capacity to service debt in the face of adverse market conditions will come under increased scrutiny.
In its newly-published report on the industry, Debtwire highlights several other current trends likely to shape the years ahead.
- Tankers outperform the rest of the industry, as low oil prices contribute to inventory build-ups in importing countries. This outperformance is expected to continue.
- Operational alliances are likely to lead efficiency improvements in the container segment, meaning companies without comparable economies of scale are likely to suffer.
- Dry bulk is going through one of the worst downturns in history, due to huge overcapacity and slowing demand growth for commodities. Companies with liquidity or conservative balance sheets may be able to take advantage.
- The industry’s liquefied natural gas (LNG) segment is under pressure, as demand disappoints and the tanker fleet continues to grow.
- LPG rates surge to record highs on almost full utilisation, although the large order book spells trouble ahead.
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