Moody’s Japan K.K recently issued a stable outlook for the global shipping industry over the next 12-18 months. The forecast calls for moderate EBITDA in the range of 5%-7%; however, this growth is mainly reflected in cost cutting by shipping companies as opposed to a growth in demand. Moody’s continues to forecast supply for the dry bulk segment of shipping to outpace demand growth through 2016. The oversupply will keep freight rates low over the next 12-18 months and strain revenue and EBITDA growth.
Container scrapping rates were lower than forecasted in 2014. 2015’s expected deliveries of 1.75 million TEU’s will further exacerbate current industry overcapacity and expected scrapping rates are even below 2014’s figures. The main driver was the fall in scrap prices over 2014, forcing companies to hold back on scrapping activities until prices rise. Consequently, this pushed the growth rate in overall container supply to 6.2% for 2014, compared to the originally forecasted 5.2%. We expect this issue to negatively affect shipping container valuations for at least the next few years until 2017-2018.