DBRS Limited (DBRS Morningstar) DBRS Morningstar says it has released a commentary on the impact of the Coronavirus Disease (COVID-19) pandemic on container terminal operators. The commentary assesses the potential impact of the coronavirus pandemic on global container terminal volumes by looking at historical data, performance during the 2008–09 financial crisis, medium-term indicators of demand, and other factors.
The commentary also looks at the impact of trade tensions on container terminal volumes at major North American ports in light of the potential reopening of the trade deal entered into between the U.S. and China in January 2020. DBRS Morningstar rates container terminal operators with presence in North America, Latin America, Europe, and Asia, all on a private basis and does not publish comments on such ratings.
Key highlights include:
- Global container terminal volumes are correlated with gross domestic product (GDP). Since 2001, the only period of decline in volumes was during the 2008–09 financial crisis, though they fully recovered the next year.
- In April 2020, the International Monetary Fund forecast a GDP decline of 3% in 2020, which is much more severe than during the 2008–09 financial crisis (-0.5%).
- Even before the coronavirus pandemic, the tariffs imposed by the United States Trade Representative seemed to have slowed the growth in North American container terminals. While there was a partial resolution when the U.S. entered into Phase 1 of its trade deal with China in January 2020, reopening the trade deal as is currently being discussed could affect volumes after conditions around the coronavirus pandemic ease.
- While volumes at Chinese terminals have recovered after the country’s extended factory shutdown, quarantine, and lockdown conditions continue to affect demand. There has been a high degree of sailing cancellations (up to 35% in some routes).
- For 2020, based on a regression analysis with some limitations, DBRS Morningstar estimates that the extent of decline in container terminal volumes could be approximately 23% with a bounceback, though not a full recovery, in 2021.
- At an individual terminal level, several other drivers exist, including the shareholding alliances and ownership, contractual provisions, addition of new loops, etc. DBRS Morningstar assesses the rating impact on credits on a case-by-case basis. Compared with the financial risk assessment, DBRS Morningstar gives heavier weight to the business risk assessment for investment-grade credits, which remain largely unchanged.