The earnings of shipping companies globally will decline in 2020 amid sharply reduced demand for shipping services in the wake of the coronavirus outbreak, Moody's Investors Service said in a report.
"This is because of the expected impact of the outbreak on Chinese manufacturing output and demand for coal and iron ore in China, especially during the first half of 2020, as well as related economic disruption," Moody's said.
Given the rapid and widening spread of the coronavirus outbreak and the deteriorating global economic outlook, there is a downside risk that the EBITDA of shipping companies globally could decline by 25-30%, similar to levels last seen in 2016 when Hanjin Shipping Co went bankrupt in one of the largest recent failures in the sector.
Within the shipping industry, for the container shipping and dry bulk segments, the demand-supply balance is expected to tilt towards oversupply. The situation is more positive for tankers segment at the moment given the recent sharp drop in oil prices.
"The negative pressure on tanker shipping companies from reduced demand for oil and oil products because of the coronavirus outbreak has been unexpectedly mitigated by the recent sharp drop in oil prices." Moody's said.
Both the spot and charter rates have risen significantly in the past week and are likely to remain at elevated levels through April following the announcement of discounts on oil sales by Saudi Arabia.
Source:sxcoal
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