Fitch: Global Shipping Outlook Cut to Negative on Weak Demand

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: 2016 Outlook: Global Shipping https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875089LONDON, December 10 (Fitch) Fitch Ratings has revised the global shipping sector outlook for 2016 to negative from stable in 2015. We expect muted global trade growth and the economic slowdown in emerging markets to exacerbate overcapacity, leading to declining and volatile freight rates. But performance will vary across the segments, with dry-bulk and container shipping under pressure, while tanker and LNG shipping fare better.China's slower growth and economic transition will pose particularly significant risks for the shipping sector due to its key role in global trade, accounting for two-thirds of global iron ore imports and 20% of world coal imports. Weaker demand growth will increase overcapacity, the key factor blighting the shipping sector's recovery prospects and putting pressure on freight rates. We expect container shipping capacity to rise 6% in 2016 on top of a 9% increase in 2015, easily outpacing demand growth of 2% this year and 3%-4.5% in 2016.Shipping companies will continue to implement defensive measures including cost-cutting, which will be helped by lower bunker prices, slow steaming, idling and the cancellation of sailings to achieve profitability. But we believe these measures are insufficient to lead to a protracted recovery in the sector. Rigorous capacity discipline along with a pick-up in demand would be necessary to reach a sustained equilibrium.We expect larger container shipping companies that successfully implemented cost-containment measures to remain profitable in 2016. But the financials of smaller, unrated, especially dry-bulk shippers will remain stretched, which will probably lead to more bankruptcies. Tanker shipping companies will outperform their peers in other segments due to more moderate fleet growth and healthy demand resulting from oil stockpiling and high refinery throughput due to low oil prices.For more details on our expectations for the sector, see "2016 Outlook: Shipping", available at www.fitchratings.com or by clicking the link above.Contact: Angelina Valavina Senior DirectorCorporates+44 20 3530 1314Fitch Ratings Limited30 North ColonnadeLondon E14 5GNSimon KennedyDirectorFitch Wire +44 20 3530 1387Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.