Dive Brief:
- Ocean shipping rates are expected to start rising as demand "outstrips" capacity in 2018, according to S&P Global Ratings in a recent release.
- After a bumpy two years of bankruptcies and carrier consolidation, S&P said the ratings for the top 17 carriers have now stabilized, signaling positive growth.
- S&P also reported that "global indicators" including nations' trade and regulatory policies could prevent the industry from rebounding robustly this year.
Dive Insight:
Ocean shipping lines received some good news this week, from the Chinese New Year driving up spot rates to S&P's report that the industry is finally recovering.
After a series of bankruptcies, cyber attacks and consolidations, carriers are now on the road to recovery — which will likely bring higher ocean shipping rates. Still, the long-term forecast for the industry is a bit of a mixed bag; S&P said growth could "turn negative," depending on how supply and demand balance out.
Especially at risk are container liners and freight rates, due to "historically poor supply discipline" and the slowing of vessel scrapping. Although freight rates have reached sustainable levels following a season of upheaval, rate growth has flattened.
"Bearing in mind the persistent supply burden, freight rates will ultimately depend upon how prudent the leading container liners are in their capacity management decisions," the report said. "Taking into account historically poor supply discipline, we see a risk that new orders will accelerate."
Finally, due to increased crackdowns on environmental regulations, carriers will likely see added costs to making their operations more environmentally friendly. In the long run, however, investment in sustainable practices will be economically viable.
