Moody's: Global Shipping Challenged by Oversupply

 

Dry bulk freight rates will remain low due to subdued demand, though deferred vessel deliveries, cancellations and scrapping will help curb net capacity growth.

 

Airline profitability will weaken slightly in the year ahead, Moody's Investors Service says in its 2017 outlook for the global transportation industry. 

 

Aircraft lessors' margins will weaken amid stiff competition, while shipping companies will continue to be challenged by an oversupply of vessels. North American railroad operators will see prices rise as freight volumes stabilize.

 

Meanwhile, Moody's 2017 outlook for North American Railroads is stable, with revenue expected to grow between 0% and 2.5%. And after a steep decline this year, freight volumes should stabilize near current levels, with core pricing rising between 2% and 2.5% as a result. 

 

Coal shipments will bounce back from the recent plunge, though natural gas prices and the weather pose risks. Grain shipments should continue to show strong growth, while robust consumer spending could spur growth in intermodal.

 

Railroad operators have demonstrated the ability to adapt to changing demand conditions, Moody's says. Operating margins remained largely intact when freight demand deteriorated, while in the coming year shareholder returns will demonstrate companies' willingness to manage elevated leverage.