Moody’s Investors Service expects that the ocean shipping industry, from carriers to bulk operators, are facing overcapacity. They have a negative outlook for the industry lasting twelve to eighteen months.
Marco Vetulli, a Senior Credit Officer in Moody’s Corporate Finance Group, reportedly said that “The dry bulk sector will likely be hit hardest this year because the segment’s order book equals nearly half of the current capacity, with about 80 percent of the vessels to be delivered over the next two years.”
A Journal of Commerce article about container ship capacity growth states that “Of the 230 ships due for delivery next year, 59 have a nominal container capacity of 10,000 TEUs or more, which will introduce an additional 0.8 million TEUs into this segment. The growth of containerships fleets in the size bracket of 10,000 TEUs or more is already expected to reach 70 percent year-over-year in 2011, and will grow by an additional 57 percent in 2012.”
The oil tanker sector is expected to remain in peril, despite the increase in oil demand over the last year and a half. Moody’s doesn’t expect their recovery to last throughout 2012 or 2013. Moody’s expects demand to weaken and overcapacity to become more of a problem as new ocean carrier vessels are delivered over the next two years.
Earnings so far in 2011 have been favorable, but the balance of supply and demand that ocean freight companies have been enjoying, is not expected to last forever. They also reportedly said that “the supply chain disruptions caused by the earthquake and tsunami in Japan in March will be short-lived and volume will recover to pre-earthquake levels in the fourth quarter.”
Despite a negative outlook, the retail sector is expecting increased in import volume. The National Retail Federation and Hackett Associates said in their monthly Global Port Tracker that they expect the volume at US container ports to rise to “double digits this fall. “With the economy facing continuing challenges, retailers are managing their inventory levels carefully,” said Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy. “But the increases in import volume expected this fall are a clear sign that retailers are confident consumer demand will be there in the fourth quarter.”
Ben Hackett, founder of Hackett Associates, an expert maritime industry advisor and researcher, said that “The low level of inventories-to-sales ratios suggest that import container flows will continue at their suppressed levels for the summer. On the bright side, there will be no imminent boom or bust in volumes as we experienced in 2007 and 2010.”
Sources:
- http://www.hackettassociates.com/
- http://www.joc.com/container-shipping/national-retail-federation-forecasts-pickup-cargo-fall
- http://www.joc.com/container-shipping/braemar-forecasts-record-boxship-capacity-growth
