Container segment of Indian coastal shipping to bear the brunt of Covid-19: ICRA
April 1, 2020: According to the credit rating agency, ICRA, the coastal shipping segment of the country, which had witnessed healthy growth in the last few years with Govt push, will witness some adverse impact in the near term, mainly in the container segment.
April 1, 2020: According to the credit rating agency, ICRA, the coastal shipping segment of the country, which had witnessed healthy growth in the last few years with Govt push, will witness some adverse impact in the near term, mainly in the container segment. Whereas the impact on the bulk segment will be limited due to largely the essential nature of those commodities, which will not be impacted by the lockdown.
As per ICRA note, the near-term outlook for major shipping segments like dry bulk, containers and offshore is negative. The exceptions to this trend are oil tankers wherein the sharp drop in oil prices has led to an increase in demand - both for the supply of oil and for floating storage. As a result, the tanker rates have witnessed a significant increase though the sustainability of these high rates, beyond the near term, remains to be seen.
While the overall outlook is challenging, in the near-term, the impact on shipping companies with a high share of tankers should be mitigated due to the high tanker rates.
K. Ravichandran, senior VP and group head, ICRA Ratings, said, “The credit profile of Indian shipping companies is expected to remain under stress in the near- term and companies which are highly leveraged will be adversely impacted by the downturn. The implementation of the IMO-2020 norms has also led to an increase in operating costs for the sector, due to higher cost of low sulphur fuel, although the drop in crude oil prices has mitigated the impact to an extent.”
The charter rates for dry bulk and container segments have witnessed a steep moderation in the last two months. Further, the steep fall in crude oil prices, following OPEC’s inability to agree to production cuts, is expected to result in a moderation in E&P activity at least over the next six months to one year, which is going to harm the offshore segment.
Sai Krishna, AVP, ICRA Ratings, further added, “The recovery in the shipping sectors like dry bulk and containers will depend on the recovery in global economic activity, post abatement of the Covid-19 outbreak, starting from China, the timeline for which remains uncertain at present as the crisis is still at an evolving stage. Further, any major changes in the global industrial supply chain, during the recovery phase will also have an impact on shipping trade routes. Additionally, a supply-side correction in the form of increased scrapping, should also be beneficial for the sector in the recovery phase.”
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