According to Fitch Ratings, slower worldwide economic growth and protectionist policies effected worldwide render the global shipping outlook bleak for 2019. On the positive side, better tonnage capacity management by ship owners/operators and the relatively stable outlook of the freight market seem to slightly offset the former. Fitch Ratings expect that in 2019, fundamentals for dry bulk and container shipping may be slightly better; however, the tanker sector will suffer a supply imbalance with the influx of more tankers entering the market. The main fear for the shipping market is the rise in protectionist policies implemented by nations regarding worldwide trade. The latter will negatively impact the worldwide trade/GDP which will, in turn, have a bearing on global shipping which transports approximately 80% of goods earth wide.
On the other hand, stricter fuel regulations requiring the use of cleaner fuels will increase the fuel costs and thus the operating costs of all ships. The shippers will either have to pay for the same or pass on these costs to their customers. The only parties benefiting from the implementation of stricter fuel regulations are product tanker market players who will have to transport greater quantities of cleaner fuels such as diesel/gas oil.
Regarding the dry bulk shipping sector, the 2019 market outlook is moderate given that the freight market is expected to be flat and the net fleet growth is expected to be 3%. Global trade ”wars”, especially between China and the US, may impact cargo flows of grains and minor bulk cargoes. Nevertheless, it must be stated that the demand for shipping services may not fall because the trade routes will be shifted. To illustrate, Chinese tariffs on US grain cargoes just increased the South American grain exports to China, therefore causing a trade route shift rather than a halt. Also, similar Chinese import taxation on US soybeans just resulted in the same being exported to Europe and the Middle East instead.
With respect to the container shipping market outlook for 2019, the volume of trade in containers is expected to increase, though at a slower pace, and the number of new container vessels expected to enter the market are few. Hence, the supply and demand forces will be more balanced and the mere slight increase in the supply of containerships will also contribute in a healthier freight market. Furthermore, there is more organized and better use of the containership tonnage capacity as the main market players have a greater share of the market compared to the past. To illustrate, in 2018 the five main players of the container shipping market possessed 63% of the market (tonnage capacity) compared to 31% in 2000.
Finally, the tanker market has a bleaker outlook for 2019. That is partly because of the greater increase in tonnage supply; net tanker capacity is predicted to grow at 3% in 2019 compared to 1.5% in 2018. In addition, the supply and demand of oil may decrease on a global scale. As far as supply is concerned, US sanctions on crude oil exported from Iran as well as OPEC’s decision regarding oil production awaited during this month (December 2018) may impact the supply of oil as a transported good. The latter will be consequently reflect in lower demand for oil transportation; that is, lower demand for tankers transportation services. As far as the demand side is concerned, the US EIA (Energy Information Administration) expects that there will be a minor reduction in global oil consumption; that is, global oil consumption is forecasted to increase 1.4% in 2019 compared to 1.5% in 2018.
Source: Hellenic Shipping News, 5/12/18; (Fitch Ratings)
Reference: Hellenic Shipping news