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Ocean Cargo: Moody’s downgrades container shipping forecast

Bulk and breakbulk carriers are also suffering the consequences of too much capacity
By Patrick Burnson, Executive Editor
July 12, 2011

The container shipping industry is not the only segment of ocean carriage under severe pressure, said Moody’s Investors Service. Bulk and breakbulk carriers are also suffering the consequences of too much capacity.

According to reports on yesterday’s teleconference, it will be at least a year before demand catches up with supply in nearly all niche categories of vessel operations.

“The current dry-bulk order book is equal to approximately 46 percent of the tonnage on the water, and around 80 percent of these vessels are due for delivery over the next two years, creating a supply-demand imbalance that will continue to depress freight rates,” said Moody’s Corporate Finance Group vice president / senior credit officer Marco Vetulli.

On the container side, Moodys stated that the downside risks associated with oversupply have recently heightened on the back of a surge in orders for new vessels, “which is a significant contributor to the negative outlook.”

This mirrors recent reports in LM which noted that a mass movement toward fleet building in recent years has softened the revenue model.

“The deilemma is that each carrier is aware that its top priority is to be cost-competitive, even if the collective impact of individual orders for lower unit-cost vessels is weakening the market,” said Neil Dekker, editor of the Drewry’s Container Forecaster.
Moody’s expectations for the second half of 2011 remain neutral, however. Its report added that Japanese shipping conglomerates were feeling less of an impact because of their scale, diversification and strong relationships with customers act as mitigating factors.

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About the Author

Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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