Moderate

Shipping & Ports

A rebound in exports from China have supported the shipping sector in recent months, however global economic confidence remains fragile.

Sector trends & challenges

  • Container rates

    Prices are at historic highs as COVID-19 impacts on both supply and demand for shipping capacity.

  • Passenger transport demand

    COVID-19 is placing pressure on businesses to shorten their supply chains. Reduced demand for passenger transport and cruise holidays is having a sizable impact on operators and passenger ports.

  • Environmental regulation

    IMO regulations are resulting in a transition to low sulphur fuels increasing fuel costs and impacting margins. Higher capex is now required for scrubbers and there is an increased risk of fleet obsolescence.

Sector rating profile

The rating profile we have observed across the sector has been complex and diverging between shipping lines and port operators. It is evident that COVID-19 has had wide ranging impact, both positive and negative.

Shipping & Ports

The impact of the COVID-19 pandemic has driven a raft of changes across the Shipping & Ports sector, both positive and negative.

For shipping lines, container rates have increased to historic highs in recent months as demand has rebounded. By contrast, demand for cruise holidays remains depressed which continues to have a sizeable impact on operators and passenger ports.

COVID-19 has encouraged businesses to review their supply chains, shortening them in places in order to improve both resilience and oversight. This may have a longer-term impact on shipping growth.

Political changes in the UK and US are likely to have an impact on trade routes, with political tensions and protectionism limiting growth in intercontinental trade volumes. New global manufacturing networks are likely to emerge driving a change in shipping patterns. In the UK, Brexit, which is currently impacting port users more than port operators, has the potential to cause changes to both trade routes and volumes over the medium-term.

The proposal for the establishment of free ports in the UK, could provide a boost to UK ports over the long-term. Changes in global trade relationships emanating from post-Brexit trade deals may support international shipping.

Environmental pressures are likely to continue impacting costs. Recent changes to IMO regulations are demanding a rapid transition to low sulphur fuels, increasing fuel costs or requiring costly fleet modifications. Higher capex is now required for emission ‘scrubbers’ and there is an increased risk of fleet obsolescence. Divestment in the sector by large banks in recent years has reduced financing options for smaller vessel owners and operators, which makes navigating this difficult period even tougher.

Find Your Expert

David Pike is Interpath Lead for the Transport & Logistics sector, which includes Shipping & Ports as one of four core segments. James Bennett leads our approach to this sector nationally. For a full list of our senior people with experience in the sector use the button below.

Our senior team