New Delhi: Citing weak global trade growth and persistent overcapacity, India Ratings and Research (Ind-Ra) has maintained a 'negative-to-stable' outlook for the shipping sector for the current financial year.
"The performance of dry bulk and container operators is likely to continue to be affected by weak global trade growth and persistent overcapacity, while the offshore segment will face the negative impact of lower crude oil prices," it said in a statement.
The agency, however, believes that the tanker segment, which accounts for a majority of the Indian fleet will remain an exception due to its better demand-supply situation.
"Global tanker demand has increased since 3Q FY15 on the back of a sharp drop in crude oil prices, leading to floating storage and onshore stockpiling. The demand was supplemented by an increase in long haul trade as Asian buyers procured crude oil from places other than the Middle East," it said.
The higher demand led to an increase spot freight and time charter rates which has continued into FY16.
It said the rates are likely to come down gradually as the demand will not sustain at the current artificially high levels.
Nevertheless, the decline in freight rates will be only to moderate levels as the fundamentals of the segment have improved over the last couple of years with the improving demand-supply scenario.
"Global capacity additions in the segment were only marginal in FY14 (0.2 percent) and FY15 (2.2 percent). Furthermore, Ind-Ra expects only modest capacity additions for the near term," it said.
About offshore segment, it said exploration and production (E&P) companies globally have suspended or curtailed expansion plans due to lower crude oil prices.
This has impacted the demand for offshore drill ships, jack-up rigs and other support vessels, leading to lower day rates as well as utilisation levels globally.
"The operating performance of companies in the segment is thus likely to be weaker in FY16. Companies servicing state-owned enterprises will also be affected in FY16 even though state-owned enterprises will to continue offshore activities albeit at a lower intensity," Ind-Ra said.
This is because charter rates with shipping companies will be renegotiated at lower levels.
On dry bulk, it said the persistent oversupply in the segment along with weaker demand conditions particularly in China kept freight rates low throughout FY15.
The agency expects the segment to be under pressure again in FY16 as demand conditions are expected to remain weak and incremental capacity is expected to add to the demand-supply mismatch.
It also said muted demand levels and a continued increase in global container capacity have led to a decline in container freight rates across most routes globally.
"The agency expects freight rates to remain under pressure for the rest of FY16 as global capacity growth will continue to outstrip demand growth," it said.
