Moody’s: Chinese Port Operators Under Pressure

Slower economic growth, deteriorating export competitiveness and weak liner profitability are narrowing the headroom within the ratings of Chinese port operators, according to Moody’s rating agency.

“Although manageable capex plans over the next three years will alleviate some of the pressure on their financial profiles, weak liner profitability will limit the port operators’ ability to raise handling chargers,” Osbert Tang, a Moody’s Vice President and Senior Analyst, said.

“In addition, export-oriented ports such as Shanghai and Shenzhen will be particularly affected by slowing container throughput amid muted export growth in China,” he added.

Port operators in China are facing major headwinds from slower economic growth and a weaker throughput outlook, which could lead to margin pressure due to the high fixed costs of port operations, Moody’s said in a report.

Overcapacity in the liner industry is exacerbating this pressure on the operators’ margins.

Moody’s forecast global containership capacity will increase by 4.5%-5.5% in 2016, outpacing the expected demand growth of 1.5%-2.5%.

Consequently, shipping lines are facing significant pressure on freight rates, which in turn will make it increasingly difficult for port operators to negotiate higher container handling chargers.

These pressures are somewhat mitigated by the manageable capex plans for the port operators, as most have sufficient capacity to handle mega containerships. This is in contrast to many other Southeast Asian ports, which will still see relatively high capex in the next two years.

The narrowing headroom will likely prompt the port operators to preserve cash flow through stringent cost controls and discipline in overseas expansion, Moody’s said.

In that context, China’s One Belt, One Road initiative will increase M&A capex for the port operators as they expand overseas, although most operators have thus far been selective in their investment decisions.

 

 

Share this article

Follow World Maritime News

In Depth>

Events>

<< Nov 2019 >>
MTWTFSS
28 29 30 31 1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 1

Maritime Reconnaissance and Surveillance Technology

As varied threats in the Mediterranean Sea continue to proliferate, the need to advance…

read more >

CrewConnect Global 2019

CrewConnect Global is the leading forum for collaboration to advance new industry approaches to seafarer recruitment and training.

read more >

CruiseConnect Global 2019

Attend CrewConnect Global and stay on for the CruiseConnect Summit to take part in an industry-wide conversation focused…

read more >

CWC World LNG Summit & Awards Evening

The CWC World LNG Summit & Awards Evening will be returning to Rome in 2019 to celebrate it’s 20th year.

read more >