"The revision reflects our expectation that the global industry's aggregate EBITDA will rise by mid-single digits in percentage terms year-over-year in 2014, in line with our -5 percent to 10 percent growth range for a stable outlook," says Mariko Semetko, a Moody's assistant vice president and analyst. "And while overcapacity remains a concern, we believe industry conditions are at a trough and that the supply-demand gap will not worsen materially. In this environment, we expect the supply of vessels will exceed demand by no more than 2 percent, or that demand will exceed supply by up to 2 percent," added Semetko.
Moody's announced the revision in its latest report on the shipping sector titled "Change to Stable Outlook for Shipping Sector Reflects EBITDA Growth". The report further notes that cost reductions – including the effects of lower bunker prices, as well as the application of slower steaming speeds and efficiency savings – have driven the growth in EBITDA. At the same time, market conditions remain tepid, but are not deteriorating, with freight rates for the dry-bulk segment showing some improvement but those for the container segment remaining under pressure.
The sector is also saving on costs through postponing and canceling deliveries of new vessels, scrapping the oldest and most inefficient vessels, and idling vessels.
Moody's would consider changing the outlook back to negative if there are signs that the supply-demand gap is likely to widen such that supply exceeds demand by more than 2 percent or if the industry's aggregate EBITDA declines by more than 5 percent. Moody’s will also consider changing the outlook to positive if the amount of vessel oversupply declines materially and if the industry's aggregate EBITDA growth exceeds 10 percent.