Fitch Predicts More M&A Activity, Defaults in Shipping Sector in 2017

Muted demand growth will exacerbate overcapacity for the shipping sector in 2017, putting pressure on freight rates and driving further consolidation and defaults, according to Fitch Ratings.

Fitch expects performance in all segments to be under pressure and has therefore maintained its negative sector outlook.

However, tanker shipping will face slightly less stress than dry bulk and container shipping, according to Fitch.

Many container shipping and tanker shipping companies had sufficient cash to cover short-term maturities at their most recent reporting date, but they are still reliant on uninterrupted access to bank funding to cover negative free cash flow. This funding is even more critical for companies that are not able to cover their upcoming maturities.

Therefore, the filing for receivership in August by Korea-based Hanjin Shipping, the seventh-largest container shipping company in the world, may have far-reaching ramifications, according to Fitch.

In particular, creditors’ withdrawal of support may indicate a reassessment of the financing landscape, where secured bank funding for new vessels has remained relatively accessible even as market conditions have deteriorated.

Fitch expects more Mergers And Acquisitions (M&A) activity and defaults in the short and medium term. But these will only restore equilibrium and boost freight rates if they prompt capacity reduction.

In container shipping Fitch expects consolidation to affect companies across the entire segment, with smaller operators focusing on survival through increasing scale while market leaders such as Maersk Line defend their market position through M&A. Defaults are likely to be concentrated among companies with weak liquidity and challenges with access to bank funding, Fitch said.

Share this article

Follow World Maritime News

In Depth>

Events>

<< Jul 2018 >>
MTWTFSS
25 26 27 28 29 30 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 31 1 2 3 4 5

TRANSTEC 2018

TRANSTEC 2018 welcomes participants to explore Russian Ports and Shipping development opportunities…

read more >

Europort 2018

From 15-17 May 2018, the 12th edition of Europort Romania willl take place in the IDU Hall in Constanta…

read more >

SMM 2018

This is a must-attend event – a unique opportunity to meet key players, display business strengths, establish new contacts and exchange…

read more >

Defence Safety Conference Supported by The Defence Safety Authority, UK MoD

The Defence Safety Conference is the first of its kind exclusively dedicated to safety across the defence domain…

read more >