Overcapacity lingers in shipping outlook

December 6 - The outlook for global shipping in 2018 remains negative, as lingering overcapacity continues to restrict material improvement in market fundamentals, says Fitch Ratings.

According to the ratings agency, container shipping freight rates have increased this year, but overcapacity makes this recovery fragile and previous rate increases have proved short lived.

In its Fitch 2018 Outlook: Global Shipping, the company explained that any improvement in market sentiment tends to stimulate new orders, and this happened again when new orders, including mega-ships, surged in the third quarter of 2017.

"We expect supply growth to be over 5.5 percent in 2018, outpacing a likely 4.5 percent increase in container transport volume growth," said Fitch Ratings. "A sustainable recovery in rates will need continuous and consistent capacity discipline in the industry. This could be driven by consolidation in the sector over the medium term."

The recent recovery in dry bulk shipping rates may also prove short lived, although, unlike for the other segments, Fitch Ratings expects demand to outstrip the growth in vessel supply during 2018.

The market balance could be helped by the low level of new vessel orders seen over the last three years. China will remain the key driver for dry bulk commodities imports and trade. The sector is therefore particularly sensitive to Chinese GDP growth, which Fitch Ratings expects to be 6.4 percent in 2018.

 

www.fitchratings.com

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