Shipping sector facing challenging time; recovery depends on revival in global economic activity: Icra

The shipping sector is facing a challenging time due to the Covid-19 pandemic and its recovery depends on a revival in the global economic activity, rating agency Icra said in Wednesday. The credit profile of Indian shipping companies is expected to remain under stress in the near-term and companies which are highly leveraged will be adversely impacted by the downturn, it added.

"The shipping sector is facing a challenging time due to the Covid-19 outbreak and its impact on global trade... the near-term outlook for major shipping segments like dry bulk, containers and offshore is negative. The exceptions to this trend are oil tankers wherein the sharp drop in oil prices has led to an increase in demand - both for supply of oil and for floating storage," the rating agency said in a statement. As a result, the tanker rates have witnessed a significant increase though the sustainability of these high rates, beyond the near term, remains to be seen, it said and added while the overall outlook is challenging, in the near-term, the impact on shipping companies with a high share of tankers should be mitigated due to the high tanker rates. Regarding the impact on the domestic shipping sector, K Ravichandran, Senior VP and Group Head, Icra Ratings, said, “The credit profile of Indian shipping companies is expected to remain under stress in the near-term and companies which are highly leveraged will be adversely impacted by the downturn." Although the impact of pandemic is currently evolving, most of the major economies starting with China have implemented extended lockdowns, leading to disruption in supply chains and severe slowdown in economic activities is expected in major regions, it said. The recovery in the global shipping sector will be contingent on the recovery in global economic activity. Sai Krishna, AVP, Icra Ratings, said: “The recovery in the shipping sectors like dry bulk and containers will depend on the recovery in global economic activity, post abatement of the Covid-19 outbreak, starting from China, the timeline for which remains uncertain at present as the crisis is still at an evolving stage." PTI NAM MKJ