Moody's Investors Service has revised for the first time since June 2011 its outlook for the global shipping industry to stable from negative.
"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% to 10% 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," says Semetko.
"In this environment, we expect the supply of vessels will exceed demand by no more than 2%, or that demand will exceed supply by up to 2%," says Semetko.
Semetko was commenting on the release of a Moody's report titled "Change to Stable Outlook for Shipping Sector Reflects EBITDA Growth". As indicated, the industry outlook had been negative since June 2011.
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 cancelling 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 it sees signs that the supply-demand gap is likely to widen such that supply exceeds demand by more than 2%.
Moody's said it could also return the outlook to negative if it see signs that the industry's aggregate EBITDA will decline by over 5%. Finally, we would consider a positive outlook if the amount of vessel oversupply declines materially and if the industry's aggregate EBITDA growth exceeds 10%.