• 2020 April 8 12:42

    Shipping credit outlook revised to negative: cash crunch worsens as Covid-19 disrupts trade

    The credit outlook for container shipping companies has worsened as they grapple with today’s difficult operating conditions brought on by the Covid-19 pandemic, a global recession this year and likely subdued longer-term growth, Scope Ratings said Tuesday in a media release.

    Scope Ratings has revised its outlook for the sector to negative, from stable in its early-February outlook, when the impact of the coronavirus outbreak was confined largely to China and other parts of Asia.

    The global spread of the disease, further disruptions to international supply chains, and multi-country lockdowns over the past two months have drastically reduced demand for shipping. Volumes of containers shipped to and from Chinese ports fell steeply in the first quarter at the same time as the number of missed port calls rose sharply, indicating a lack of volume for scheduled port calls, according to analysis by the United Nations Conference on Trade and Development.

    “Repairing the damage inflicted on the world’s logistics system will take time: a return to medium- and long-term trends in shipping and trade is unlikely before late Q3,” says Denis Kuhn, analyst at Scope.

    “Longer term, the outlook remains gloomy considering the longer-lasting economic damage inflicted by the health crisis on government and corporate balance sheets and the strong correlation between global GDP and transportation-sector growth,” says Kuhn. (See Scope’s updated outlook on the airlines sector)

    Scope expects the global economy to contract by around 0.5% this year, a deeper recession than the trough during the global financial crisis, when global output contracted by 0.1% in 2009 (see Scope’s Q2 2020 Sovereign Update). None of the world’s largest economies will escape the pandemic’s macro-economic and financial-sector impact. Scope forecasts an economic contraction of around 6.5% in the euro area in 2020, with growth in China of only 4%, a 3.5% decline in the United States and a 4% contraction in Japan.

    “The slump in trade volumes translates into idle ships: multi-million euro assets incurring hefty costs but generating much less income,” says Kuhn.

    “Some cash outflows are discretionary such as certain capital expenditure, dividends and share buybacks, but corporate overheads, as well as financing and fixed operating costs continue to drain liquidity, all of which are a particular problem for smaller players,” says Kuhn.

    So-called blank sailings, in which ships sail without cargo in order to re-assign capacity from one route to another, are exacerbating operating losses and are more likely to be necessary for operators outside of the world’s three leading shipping alliances1. Even the 2M alliance partners MSC and Maersk are cancelling an unprecedented 21% of Asia-Europe capacity in Q2; other alliances and single carriers are expected to follow.

    The shipping sector is facing a liquidity squeeze, prompting the European Community Shipowners’ Associations (ECSA) on 2 April to call for a “targeted rescue and recovery plan” for Europe’s maritime sector. One example of the measures already underway is the international maritime authorities’ relaxation of controls for IMO 2020 clean-fuel regulations to ease near-term cash outflows for operators by allowing them to postpone use of more expensive cleaner fuels or fitting cleaning technologies like scrubbers.

    Uncertainties surrounding the scale, scope and effectiveness of government and regulatory interventions to support the industry make it difficult to judge the degree to which individual companies are at risk of going out of business. “However, since access to financing is crucial, the operators with a large diversified asset base have substantial advantages,” says Kuhn.

    One silver lining for the sector is the prospect of more consolidation. “One of the biggest drags on the sectors’ operating profitability has been persistent overcapacity. This crisis may further accelerate the clearing out of excess capacity as weaker players are forced out of business with an even larger proportion of trade volume shared among the container alliances,” Kuhn says.

    Kuhn also cautions against over-pessimism given the essential role the shipping sector has in keeping the global economy functioning as the main transporter of goods. “Production will ramp up again globally, though we do not expect volumes to climb to pre-crisis levels fast,” says Kuhn.

    12M (Denmark’s Maersk Line and Swiss-based Mediterranean Shipping Co); Ocean Alliance (China’s COSCO and OOCL, France’s CMA CGM, Taiwan’s Evergreen); THE Alliance (Germany’s Hapag-Lloyd, Japan’s Ocean Network Express, Taiwan’s Yang Ming)

    About Scope Ratings GmbH
    Scope Ratings GmbH is part of the Scope Group with headquarters in Berlin and offices in Frankfurt, London, Madrid, Milan, Oslo and Paris. As the leading European credit rating agency, the company specialises in the analysis and ratings of financial institutions, corporates, structured finance, project finance and public finance. Scope Ratings offers a credit risk analysis that is opinion-driven, forward-looking and non-mechanistic, an approach which adds to a greater diversity of opinions for institutional investors. Scope Ratings is a credit rating agency registered in accordance with the EU rating regulation and operating in the European Union with ECAI status.


2024 March 18

18:13 Brunvoll propulsion chosen for ESVAGT's growing fleet of SOVs
17:42 ADNOC signs second long-term Heads of Agreement for Ruwais LNG Project
17:37 Cemre Marin Endustri shipyard holds launching ceremony for CMAL's MV Isle of Islay
17:24 Fortescue successfully conducts world’s first use of ammonia as a marine fuel in a dual-fueled ammonia-powered vessel in the Port of Singapore
17:02 APL updates on European Union’s Import Control System 2
16:03 MED Marine contracted to build MED-A2575 series tug for SVS Maritime
15:31 Hanwha Ocean and BV join hands to develop a 270K LNG carrier
15:17 HD Korea Shipbuilding awarded contracts for three VLACs
14:18 Port of Skagen and Stillstrom partner to decarbonise anchorage zone with offshore charging solutions
13:22 Sanmar delivers 6th battery electric power tugboat to Norwegian operator
13:16 COSCO SHIPPING Lines announces the launch of OCEAN Alliance DAY 8 product this year
12:21 Dutch offshore wind farm approved by LR
11:39 ClassNK awards first-ever notation for improvements in living and working environment to Fuyo Kaiun's bulk carrier "ELETTRA"
11:31 Davie strengthens Québec’s shipbuilding industry by supporting the reorientation of AFCDC
10:44 Storylines and Brodosplit shipyard renew ship building contract to construct private residence ship
10:25 BOEM announces environmental review of proposed wind energy project offshore New Jersey
09:51 First ‘flying’ electric ferry to debut in New Zealand in 2025

2024 March 17

16:31 Norwegian Shipowners' Association names Harald Fotland as its President
15:22 ABS Wavesight Nautical Systems now supports fully digital, streamlined SIRE 2.0 inspections
14:15 TechnipFMC selected by NEP to deliver the first all-electric iEPCI for CCS
13:03 US sanctions shipping company, targeting Iran and Houthi rebels
11:01 The first hybrid electric vessel built in South America will use a Corvus battery system
09:47 Kalmar and Forterra sign JDA for autonomous terminal tractor

2024 March 16

16:24 The Netherlands selects Naval Group for its submarine replacement program
15:41 Equinor exercises options to extend four-year drilling contracts
14:17 GONDAN Shipbuilders hosts launching ceremony for Edda Wind's CSOV C503
13:47 Van Oord, Van Aalsburg partner to further develop circular fascine mattresses
12:13 Snam wins "A" raing in CDP's Suppliers Engagement Rating for efforts against climate change
10:54 ULSTEIN unveils new subsea vessel for offshore energy tasks

2024 March 15

18:07 DNV gives nod to Friede & Goldman BargeRack solution
18:02 New partnership enables faster offshore wind installations in the U.S.
17:53 First production line at ‘World’s Largest Monopile Factory’ to go live in July
17:21 Brunvoll DP2 upgrades for more Mokster vessels
16:55 CMA CGM to suspend its calls at Port au Prince, Haiti
16:03 GEFO's LNG DF chemical tanker Tosca gets Green Award
15:19 CEVA Logistics develops new vehicle logistics business at the Port of Dunkirk
14:11 MPA: SaR operation continues for a missing crew member of the Liberia-flagged UTOPIA
13:07 To develop the Far East it makes sense to build a new shipyard in the country’s eastern regions, President Putin said
12:48 World’s first use of ammonia as a marine fuel in a dual-fuelled ammonia-powered vessel in the Port of Singapore
11:39 COSCO Shipping calls Port of Genoa, Italy with 20,000 TEU vessels on regular basis
10:03 DMC contracted to supply rudder systems for the world’s largest PCTCs

2024 March 14

18:04 Shearwater awarded seismic survey for UK carbon capture and storage project
17:15 UAE, world leaders discuss maritime corridor for aid to Gaza
16:05 Marine fuel sales at Singapore drop to a three-month low in February
15:43 World Shipping Council selects NCB for liner shipping Cargo Safety Program
15:00 ZIM reports results for 2023
14:57 DP World announces 2023 results
14:29 HaiSea unveils new operations facility for the world’s greenest tugboat fleet
13:44 DEME awards KENC with engineering and fabrication scope on multiple offshore wind installation projects
13:25 MABUX: Bunker Outlook, Week 11, 2024
12:43 Wartsila Lifecycle Agreement to support optimised low-emission operations for two P&O Ferries vessels
11:35 Hapag-Lloyd transport volumes up by 0.5% to 11.9 million TEU in 2023
10:51 NYK and Astomos Energy christen new dual-fuel LPG carrier
10:25 Port of Long Beach container volume up 24.1% to 674,723 TEUs in Feb 2024

2024 March 13

18:02 Lebanese, French officials float a plan to rebuild Beirut port nearly 4 years after huge explosion
17:23 Ascenz Marorka obtains type approval for cyber-security from Bureau Veritas for its digital solutions
16:58 USDOT announces $500 mln for ports available through the Port Infrastructure Development Program
15:44 RINA wins contract to create global investment plan for cruise sector
15:23 Hede International Shipping enters the Transpacific container trade
14:43 Concordia Damen wins contract to deliver a CDS2410 River Pusher to Transporte Fluviales Frey Bentos
14:13 CMA CGM Group launches its first loyalty program SEA REWARD
13:13 Cargill posts results of the six-month test period of the world’s first wind-powered ocean vessel
12:24 Rotterdam's Gate Terminal sees need for more LNG bunkering capacity at Rotterdam
11:58 MOL announces delivery of LNG-fueled car carrier CERULEAN ACE
11:24 Panama Canal announces increase in daily slots at Panamax locks
10:25 thyssenkrupp Veerhaven plans the climate-friendly pusher tug

2024 March 12

18:04 Cosco Shipping installs Iridium Global Maritime Distress and Safety System on PCTC Cosco Tengfei
17:30 LR issues Project Certificate for CrossWind Hollandse Kust Noord wind farm
17:16 The shipping industry to need €3.7 trillion by 2050 to move towards a zero-pollution era
16:25 China Classification Society and MAN ES sign dual-fuel methanol engine agreement