Just a few crumbs of comfort

AS usual this time of the year, forecasters have been busy recently. To nobody's great surprise, there is a lot of bad news and just a few crumbs of comfort for some sectors of the dry bulk trades. It is relatively comforting that Standard & Poor's Ratings Services (S&P) says most shipping companies should weather the storm. But negative outlooks on 25 per cent of S&P's rated shipping portfolio indicate possible rating downgrades this year.

The ratings agency says in a newly published 2016 outlook for the global shipping industry that, given the current uncertainty in global trade due to low oil prices and an unexpected slowing of the Chinese economy, shipping companies - and by extension port infrastructure - could face tough industry conditions this year.

S&P warns that weak global demand for trade cannot sustain the oversupply of ships. It adds that, given the industry's dependence on Chinese demand, a sharper slowdown in Chinese economic growth would further hurt the outlook. The agency also notes that a sudden rebound in oil prices poses a risk to shipping companies' credit quality. It says fleets enjoyed low prices in 2015 but may not have the financial buffers to compensate for a raise in fuel prices. Capital for growth will be increasingly scarce, S&P says based on a question-and-answer session with the firm's analysts.