Demand risks dent in global shipping outlook
(5 December 2019 – United Kingdom) Slowing global economic growth, trade tensions and geopolitical risks will lead to subdued demand growth in global shipping in 2020 according to Fitch ratings. The sector outlook remains negative.
Although all seaborne merchandise trade segments have demonstrated capacity growth, supporting a more appropriate supply-demand balance, a longer record of responsive capacity management is needed to improve the sector's resilience. Trade restrictions are likely to have a negative impact on global container volumes of about one percent in 2020 according to AP Moller-Maersk.
Given up to 90 percent of global goods is estimated to be carried by the international shipping industry according to the United Nations (UN), free global trade is vital for shipping. The main sector risk is that protectionist measures may escalate into a protracted trade war and damage the prospects for global trade and GDP growth.
Fitch forecasts global container volumes to expand by 2.5 percent in 2020, representing a small increase year-on-year and well below the average growth rate of 4.5 percent over the past eight years.
On January 1, 2020, the International Maritime Organization (IMO) will impose new emissions standards designed to significantly curb pollution produced by the world’s ships. For some of the world’s biggest oil producers, the new rules coming into force represent a source of great concern. The impact of IMO 2020 on tanker shipping companies is likely to be mixed, as rising compliance costs may be mitigated by increased tanker demand to transport compliant fuel. However, lingering trade and geopolitical tensions and political risk may depress long-term tanker demand.
“The main sector risk is that protectionist measures may escalate into a protracted trade war and damage the prospects for global trade and GDP growth. While some upside is possible if the trade tensions between the US and China ease, the downside risks, including expected slower GDP growth in China, soft trade growth and Brexit uncertainty, will continue to weigh on demand. The main sector risk is that protectionist measures may escalate into a protracted trade war and damage the prospects for global trade and GDP growth. While some upside is possible if the trade tensions between the US and China ease, the downside risks, including expected slower GDP growth in China, soft trade growth and Brexit uncertainty, will continue to weigh on demand,” Fitch said.” Fitch stated in the report.
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