Strong Market Supports Neutral Global Shipping Sector Outlook

Fitch Ratings maintains its neutral outlook on the global shipping sector due to continued strong market conditions in the container shipping and dry bulk segments, and expectations that the tanker segment could improve after a weak 2021.

A continued global economic recovery is key for all shipping segments to maintain their favourable supply-demand balances in 2022. The downside risks include a slower-than-forecast recovery, potentially due to a resurgence of Covid-19 cases, leading to a collapse in demand. However, pandemic-related restrictions have also led to supply-chain issues, including port congestion, which have supported rates, particularly for container shipping.

A potential increase in trade protectionism could limit shipping demand, while developments in International Maritime Organization or EU emissions regulations could affect shippers’ cost structures and their earnings capacity in the medium term.

We expect container volumes’ growth rates in 2022 to slow from the 7.4% growth rate of 2021. We forecast the supply-demand balance in 2022 to remain favourable due to relatively low supply growth. However, recent high freight rates have led to increased new containership orders, with the orderbook-to-fleet ratio increasing to over 20% from 8% at end-2020. This new capacity will start being added to global fleets from 2023.

The dry bulk segment’s growth will moderate to 2% in 2022 from 4% in 2021, partly due to lower coal and iron ore volumes. Fleet capacity growth is likely to decline to about 1.5% in 2022, which we expect to support dry-bulk rates in 2022, despite a gradual dissipation of port congestion.

Tanker volumes are still recovering from the pandemic hit, and we expect demand growth to outpace supply in 2022, which could help improve freight rates from their currently low levels.
Source: Fitch Ratings