NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) continues to engage with its rated issuers in the shipping space as the industry rides the waves of COVID-19. Despite the impact of the pandemic on the general economy, KBRA notes a favorable trend for the container shipping industry, given a strong rebound in demand growth for consumer products versus service spending (e.g., travel) as well as aircraft cargo displacement by vessels.
Aircraft are the preferred method of transportation for the vaccine, which leaves an opportunity for container ships to take market share from the air cargo industry. This vaccine opportunity may have a positive effect in the next year or two. In addition, supply is depressed with low order books and low idle rates. A wave of consolidation among container shipping companies is illustrated by the market share of large companies rising to 81% from 31% between 2012 and 2020. When the pandemic first hit, this enabled the container ship industry to be more nimble and cut capacity quickly through idling and blank sailing, which has boosted their resilience. In KBRA’s view, container shipping companies will likely be cautious about overbuilding in the near to midterm. Shipping volumes are already at pre-pandemic levels thanks to recovery in Q3 2020, and even despite contagion setbacks in Q4.
Key Takeaways
- KBRA has a favorable outlook for the container shipping industry in spite of the COVID-19 pandemic. Who would have thought the pandemic would have a positive effect on shipping credit quality? But it has increased consumption (stuff versus experiences) and shipping opportunities (e.g., airlines), a credit positive. Vaccine distribution may be another near-term opportunity.
- Global shipping volumes are already exceeding pre-pandemic levels, thanks to China’s robust and early rebound.
- The positives will likely dissipate over the medium term as the global economy rebalances toward pre-pandemic norms, with the vaccine effect as a key factor, albeit with no cliff effect on shipping volumes.
- Is there a reshaping of global trade? De-globalization trends are likely to be offset by evidence of greater trade cooperation in Asia. As such, KBRA expects moderate but still positive global trade expansion going forward, which also provides part of the basis for our favorable Outlook for the container shipping sector.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.
