Global shipping outlook 'stable' as trade tensions offset higher earnings, Moody's says

Outlook on tanker segment revised to stable from negative as oversupply issues subside

TOPSHOT - A picture taken during a guided tour by the US Navy (NAVCENT) shows the Japanese oil tanker Kokuka Courageous off the port of the Gulf emirate of Fujairah on June 19, 2019. The Japanese tanker attacked in the Gulf of Oman last week was damaged by a limpet mine resembling Iranian mines, the US military in the Middle East said today. Commander Sean Kido of the US Navy told reporters that the US military has recovered biometric information of the assailants on the Japanese ship including "hand and finger prints." Two oil tankers were damaged in twin attacks close to the Iranian coast on June 13, just outside the strategic Strait of Hormuz.
 / AFP / Mumen KHATIB

The outlook for global shipping in 2020 will remain stable as expected higher earnings are offset by US-China trade tensions and increasing regulations, Moody's Investor Services said.

Driving the stable outlook is a combination of 16 to 18 per cent projected growth in earnings before interest, tax, depreciation and amoritization (ebitda) next year and balanced growth in demand and supply, Moody's said in a report. These positives are offset by downside risks from protectionist trade policies and increasing regulation.

"The global shipping industry is facing a number of challenges into 2020, including the effects of IMO 2020 [International Maritime Organisation's regulation for a 0.5 per cent global sulphur cap for marine fuels] which will likely lead to rising fuel costs, as well as geopolitical uncertainties, such as trade conflicts, especially the US-China trade dispute," said Maria Maslovsky, a Moody's vice president and senior analyst, said.

The outlook comes amid mounting geopolitical tensions between Iran and the US in the Arabian Gulf, a region that is responsible for about a third of all seaborne petroleum. The cost of insuring Middle East oil shipments rose as war risk premiums soared after the US blamed Iran for attacks on six oil tankers and the downing of its drone in international airspace. The two tanker strikes in the Gulf of Oman have prompted insurer Lloyd's of London to declare the area a war risk zone.

"The outlook on the tanker segment has turned stable from negative with charter rates rising as demand improves and oversupply becoming less of an issue as a result of reduced ordering and increased idling," Moody's said.