shipping

Fitch highlights deteriorating 2024 outlook for shipping sector

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US-based Fitch Ratings released last month its Global Shipping Outlook 2024. The leading provider of Credit Ratings, Research and Analysis for the global financial markets, maintained its deteriorating outlook for the shipping sector, mainly reflecting the continuing challenges for the container shipping, which could lead to year-on-year (yoy) worsening of the results.

Fitch forecasts that tankers and dry bulk will remain stable yoy, with the former being the most likely to perform well. The easing of supply chain pressures that led to the near normalisation of container freight rates and lowering of profits in 2023 (after the peak of 2021-2022) has not yet fully flown through in annual earnings, and will result in further earnings weakness for container shipping companies in 2024.

The main risks include the potential for weaker-than-expected global GDP growth or geo-political developments causing adverse dislocations. The war in Ukraine has been an important driver for dry bulk (broadly negative) and tankers (positive). Along with any other disruption that may affect trade flows, the war could continue to be a major driver into 2024. A potential increase in trade protectionism (or “friend-shoring”) could also see changes in trade flows and limit demand across a few high-margin or critical products.

According to S&P Global, its “Global Shipping Report” made similar predictions. The American capital markets information company warned there will be significant effects by 2024 as shippers will need to adjust to a significantly changed environment.

Meanwhile, the S&P Global’s newly published “Top-10 Economic Predictions for 2024” forecasts global real GDP will expand at 2.3 percent in 2024, down from an estimated 2.7 percent in 2023.

Other Top-10 predictions include:

Central bank easing cycles are already well under way in many emerging economies and rate cuts are forecast to become more widespread during the first half of 2024.

Mainland China’s economy will be supported by more accommodative policy, a gradual improvement of private-sector confidence and an expected bottoming out of the housing market downturn.

The U.S. dollar will depreciate, consistent with weaker U.S. growth, narrowing interest rate differentials and the persistent large current-account deficit. The yen is expected to appreciate more against the U.S. dollar than many of its peers as tightening Japanese monetary policy bucks the global trend.

Some financial headwinds to growth will persist, including the adverse effect of rising non-performing loans on credit supply.

Prospects for real estate prices will continue to vary across countries and sectors; supply constraints will support residential prices in some markets, although declines in Western Europe are forecast to continue.

Geopolitical factors will remain an important source of risk and uncertainty, with approximately 80 major elections taking place across the world in 2024.

Progress on global energy transition will remain uneven in 2024. Policy initiatives are supportive of investment growth in North America, leaning against recessions in the region.