Fitch Ratings has upgraded its 2021 outlook for shipping as demand recovers following the pandemic blow.
The credit ratings agency views the sector as stable going into next year, up from negative this time last year.
"Prudent capacity management, particularly in container shipping, should enable operators to benefit from a partial rebound in demand across freight categories in 2021," Fitch said.
The outlook reflects expectations for a global economic recovery and improving fundamentals for boxships and bulkers, partially offset by a relatively weak tanker segment, the company said.
Volatility possible
"Economic recovery is key to absorbing the modest supply increase we expect across shipping segments," the agency said in a report published in London.
"However, there could be higher-than-average intra-year volatility due to timing mismatches."
But Fitch is forecasting freight rates to be "fairly supportive" and less volatile than in 2020, while tankers are more exposed than other sectors.
Key risk factors include a temporary weakness in demand, which could be due to a resurgence of the pandemic, as well as a reduction in governmental economic stimuli.
Then there is increased trade protectionism, which could result in rate volatility and prolong the recovery.
Demand under pressure?
"Shipping demand could be pressured by a potential increase in trade protectionism during the recovery from the pandemic, and the outcome of a Brexit deal (or lack of)," the report said.
Fitch warned a renewed China-US trade war would have implications for global trade and supply lines.
China remains the key driver for dry bulk commodity imports and trade, the agency believes.
Greenhouse gas emissions regulations for the industry are expected to gather pace in 2021 as IMO nears its 2023 deadline for short-term measures, the report said.
"While new regulations take years to be implemented, news flow and proposals around potential new regulation should give direction to new fleet development plans of various operators," Fitch added.
The agency identified low bunker prices, which benefited operators in 2020, as likely to "evolve" with crude oil.
The company added that a recovery of prices will put the cost of various short-term regulations in the "right perspective".
Last year, Fitch maintained its negative outlook for shipping in 2020 due to a forecast slowdown in economic growth and "a balance of risks skewed to the downside".
Fitch was concerned about the US-China trade war at that time, a distant age when IMO 2020 regulations were due to enter force and before Covid-19 had been identified in China.
