Global Shipping Earnings Expected To Recede From Peak


The shipping industry’s prospects will be harmed by global growth slowdowns in 2022 and 2023, but record-high profitability is likely to motivate containership owners to make more acquisitions and capital investments as reported by Llyod’s List.

Shipping earnings decline

Shipping earnings will suffer a double-digit decline next year, following a record year in 2021, but remain considerably higher than the pre-pandemic levels, according to Moody’s Investors Service.

“Business and financial conditions will remain solid, but they are unlikely to get better than they already are today,” the rating agency said in a report, which revised the global shipping outlook to ‘stable’ from ‘positive’ on the back of peaking earnings this year.

The 13% drop in earnings before interest, taxes, depreciation, and amortisation comes amid a host of bearish factors, notably the lower gross domestic product growth in the group of 20 advanced and emerging market economies in 2022.

Moody’s estimated advanced economies, led by the US, would post average GDP growth of 4.2% in 2022, from 4.9% this year, while a steeper fall to 2.4% is forecast in 2023.

The forecast growth downtrend across the world in the next two years comes against the backdrop of the new Omicron variant, underpinning the agency’s view that lockdown measures in key global economies remain the chief source of uncertainty to the global economy and will act as a driver of financial market volatility.

Container shipping

Of the three major sectors of the global shipping industry, more significant and attention-grabbing developments are expected to occur among container shipping players as demand continues to outstrip supply and as the sector continues to ride on extended supportive fundamentals.

Moody’s foresees limited deliveries of fresh tonnage in 2022, resulting in freight rates being kept at high levels.

They are also expected to take advantage of record-high earnings and cash flow generation to pare down debt levels.

However, we expect earnings to fall from their 2021 peak but remain high.

This will help to keep freight rates high, even as it noted that dry-bulk fleet capacity grew by 3.6% in the past 12 months up to October this year.

Energy efficient

Tanker owners and operators will not have much reason to celebrate in the coming year.

Moody’s expects “the direction of business conditions for crude oil and product tankers to at least stay flat in 2022.”

It foresees a slew of positive developments in the oil sector, with growth in supply and demand as air travel recovers, but their benefits to tanker owners and operators are to be tempered by continuing fleet expansion.

Moody’s said it believed capital spending would rise significantly during the current decade because shipping companies would need to replace part of their older fleets to become more energy efficient.

“We expect orders for newer and more energy-efficient ships to continue to be a theme during 2022 as shipping companies prepare for tougher environmental regulations that will gradually be phased in from 2023.”

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Source: Lloyd’s List