Rating agency Moody's Investors Service estimates that earnings of rated shipping companies will likely decline by 6% to 10% in 2020 on the back of shrinking demand.
In a March 20 report, Moody's points to shipping demand shrinking because of economic disruption and falling manufacturing output, and it says that the outlook for the global shipping industry has changed to negative from stable in the wake of the coronavirus outbreak.
The change to a negative outlook primarily reflects the expected decline in 2020’s earnings before interest, taxes, depreciation, and amortization (EBITDA) amid sharply reduced demand for container and dry bulk shipping services as the outbreak hits Chinese manufacturing output and demand for coal and iron ore, especially during the first half of 2020.
"The earnings of rated shipping companies will likely decline by around 6% to 10% in 2020 compared with EBITDA growth of almost 40% in 2019," notes Maria Maslovsky, a Moody's vice-president and senior analyst.
Moody's added that there is a downside risk that the EBITDA of shipping companies globally could decline by 25% to 30%, similar to levels last seen in 2016 when Hanjin Shipping went bankrupt in one of the sector‘s largest recent failures.