September 30, 2025 • 18 mins
The global container shipping market faces three key themes heading into next year: the impact of tariffs on trade flows and demand, structural overcapacity and carriers’ financial resilience, with strong balance sheets buying time to manage near-term risks. In this Talking Transports podcast, Stephane Kovatchev, Bloomberg Intelligence senior cyclical-industrials credit analyst, moderates a panel with Moody’s Daniel Harlid and Fitch Ratings’ Raman Singla examining the outlook for the global containerliner market through a credit lens. Overall, the tone was cautious on container shipping’s 2026 credit metrics. The panel took place at a Bloomberg Intelligence event during London International Shipping Week.
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Speaker 1 (00:07):
Hi everyone, this is Lee Clascow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clasgow, senior freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the world. A quick public service announcement
before we dive in. Your support is instrumental keep bringing
(00:29):
great guests and conversations to you, our listeners, and we
need your support. So please, if you enjoy this podcast,
share it, like it and leave a comment. And if
you have any ideas or feedback or just want to
talk transports, I'm always happy to connect. You can find
me on the Bloomberg terminal LinkedIn, or on x at Logistics.
Speaker 2 (00:47):
Lee.
Speaker 1 (00:48):
Today we're going to do something a little different. This
episode will be co hosted by my Bloomberg Intelligence colleague,
Stefan Covicheck. Based in London, Stefan has over thirteen years
of credit experience, with a focus on European high yield
and crossover issuers. Prior to joining Bloomberg in twenty eighteen,
he was a high heeled analyst at RBS covering European industrials,
(01:13):
transportation and service companies. Stephen moderated a panel at a
Bloomberg Intelligence Shipping event at our London offices on September sixteenth.
The event was in conjunction of London International Shipping Week.
Welcome to the podcast, Stefan.
Speaker 3 (01:28):
Hi Lee, thanks for having me. We had a great
discussion with two credit rating analysts covering container shipping, Daniel
Harld of Moodies and Raman Singla of Fitch. We focused
on three teams that could shape the sector in twenty
twenty six. Number one tariffs. US tariffs are disrupting trade
flows and injecting uncertainty into shipping networks. Tariffs have already
(01:53):
pulled demand forward, creating a risk of software activity in
late twenty twenty five and into two twenty twenty six.
Number two structural overcapacity. The global container fleet is projected
to grow by eleven percent by n twenty twenty six,
while trade volumes are expected to rise only about five percent.
(02:15):
This gap could pressure freight rates and margins across the sector.
And number three, the financial resilience of carriers. Despite the
weak market outlook, liners are entering twenty twenty six with
historically strong balance sheets. This could buy the invaluable time
to face near term risks. According to our panel, overall,
(02:36):
the panel struck a cautious tone. While liners are better
positioned than in past downturns, weaker create metrics look likely
in twenty twenty six.
Speaker 1 (02:47):
Well let's hear what panel had to say.
Speaker 4 (02:49):
Good afternoon everyone, and welcome, welcome back. My name is
Stefan Kovachev, senior credit analyst covering cyclical industrials and container
shipping here Intelligence in London. So today we will be
discussing container shipping outlook with a specific focus on challenges
and opportunities for twenty twenty six.
Speaker 5 (03:12):
And for this.
Speaker 4 (03:12):
Discussion, we are very fortunate to have a wonderful panel
here with us bringing together the big three credit rating
agencies who will share in a minute their view on
the outlook for container shipping. I'm delighted to welcome Daniel Harltt,
senior credit officer for container Shipping at Moodies.
Speaker 5 (03:34):
Great to have you, Daniel, Thank you.
Speaker 4 (03:36):
Completing our panel is Rama and Singla, director at Fitch
Ratings covering transportation. Lock you Raman, So let's dive right
in to give the audience a clear baseline. In one
or two sentences, could you summarize your twenty twenty six
outlook for container shipping Raman, what's your take?
Speaker 5 (03:59):
Well?
Speaker 2 (03:59):
Thanks, I probably would not be saying anything. No, very different.
We also have a deteriorating outlook with the expectation that
supply side will keep on exceeding the demand side, so
we'll have downward pressure on rates, And on top of that,
we have the risk of red seat transits normalizing. If
(04:19):
that would happen, we would have a significant increase in
effective capacity, which would further put pressure on rates. So
overall still negative.
Speaker 5 (04:28):
Thank you. Remen Daniel, what's your take on outlook?
Speaker 6 (04:30):
Be funny if I said that it's going to boom
next year, etstead No, I think. I mean we've been
saying since before the October seven attack that next year
is going to be weak because of over capacity, and
now we are sitting the second or third year in
a row saying it's going to be weak because of
(04:51):
persisting overcapacity. Now we do think that it's going to
be weak. The question is just one again. We know
about the overcapacity, We know that the fleet has grown
substantially more than the underlying demand.
Speaker 5 (05:04):
And that we have a in.
Speaker 6 (05:06):
Basically, if atri is being inflated by shortage of capacity,
that isn't really there because there is a structural overcapacity.
So if it's going to happen in twenty six or not,
I don't know. But as if we go back to
a normalized so S canal and other factors that are distorting,
then yes, twenty six would be a really really weak
(05:29):
year for the container shiping industry.
Speaker 4 (05:31):
That's clear, Thank you, Daniel. Turning to the keyword tariffs.
How damaging our tariffs for container shipping and this is
the sector in a much weaker position today if we
compare to let's say a year ago on the back
of trade policy.
Speaker 5 (05:48):
Raman, what is your perspective on tariffs.
Speaker 2 (05:51):
Yeah, so, I think before the tariffs hit US in
April or the announcement came through, I think the expectation
for the global container volume growth for this year was
closed about four percent or so. I think Once the
announcement came out, the expectation from sort of bigger market participants,
(06:11):
some of which are here, was that we might see
slightly negative growth. And I'm talking about at global levels,
you know, so not only US, China, and since then
with some clarity happening in terms of great deals coming
through or some postponement, I think the current expectation is
we will probably be one to two percent below our
(06:33):
pre Tireft announcement expectations. So there is some impact. There
will probably be some impact next year also as we
analyze the impact this year into next year. But then
there is probably be a medium to longer term impact
if we see changes in supply chains in terms of
manufacturing capacity shifting and given in my view, given the
(06:54):
way the routes are right now, so one is the
volume impact, but in terms of the time mile uh demand,
I do not see a benefits probably been been negative.
We might just end up that that production capaccy shifting
closer to us or or the same distance, so we
be not really adding ten multimand in that sense. So
(07:15):
these are two negatives of you know, so overall sort
of volume demand going down and done miles not really
increasing or maybe maybe maybe likely decreasing. The third factor,
of course, is which can be sort of somewhat perversely positive,
is the supply chain situation or supply chain dislocations, which
is what we have seen in the last three years.
You know, with bort congestion and and and and the like.
(07:38):
Difficult to that. That is very difficult to predict. But
if that were to happen, you know, you could have
short term benefits, short term rates going up, which has
been positive for the industry for example last year. So
overall negative, but you could have short term blips.
Speaker 4 (07:52):
Right, Thank you, Aramen Daniel. Let me bring you in
with the next question. How resilient is the sector's credit
profile heading into twenty two twenty six and do you
expect cash burn, higher leverage and worsening credit metrics for
the company that you cover.
Speaker 6 (08:06):
That's a headline if I say yes to that, But
I would say if we take a step back, and
if we look at the ten largest container shipping companies,
but we exclude the ones without public balance, it's so
so they generate around sixty they have sixty percent of
the capacity in the market. When we went into COVID
(08:27):
Q one twenty twenty, so end of March ten, twenty twenty,
this guy, so it's eight nine companies. They had sixteen
billion in total of cash and short term investments on
their battleship. In Q two twenty five, they had ninety
six billion, So I think what we need to Yes,
there are a lot of challenges in the market, but credit,
(08:48):
the credit ratings and credit profile that we assess is
we do not fool ourselves saying we are very good
at predicting freight rates and how the market is going
to develop. We assess how these company is, how they
come to the market, they serve, so, what capital structure
they have, How does balances look like?
Speaker 5 (09:06):
Do we expect weaker.
Speaker 6 (09:08):
Metrics in twenty six cash burn and the other negatives
you said most likely? Yes, But I think the balance
its I mean they have with the exception of maybe
twenty three to twenty four. They've never entered and I've
written this line I think fifteen times, but they've never
entered the downturn with stronger balance sheds. And I think,
as people alluded to before, I think that goes to
(09:30):
many modes of shipping, but especially container shipping. We have
really strong balance shes right now.
Speaker 5 (09:37):
That's true.
Speaker 4 (09:37):
Indeed, Raman, let me turn to you with a supply
side question. I couldn't new ship deliveries or easing geopolitical
disruptions create excess capacity and put pressure on the industry
to counterbalance this more positive outlook we just heard.
Speaker 2 (09:54):
Sure, well to throwut one metric. We have book currently
at about thirty percent of current fleet globally, which is
the highest level in more than a decade. You know,
two thousand and eight was a time when we had
like something like sixty percent, but different times, so thirty
(10:15):
percent that would indicate an annual gross capacity addition somewhen
mid two high single digics. For a few years to come.
You know, you will have that sort of that that's
at the gross level. So of course you could have
self help measures like scrapping, like slow steaming, but how
(10:35):
much would they help, Not sure? In terms of demand.
You know, historically container shipping volume growth used to be
about two terms of global GDP growth. That used to
be this long held rule of thumb. I think it
has come down to more like one and a half
times now on average the last few years. You know,
(10:57):
given that container shipping is fairly saturated in terms of
its share of global trade, global merchandise trade, it has
grown a lot over the last thirty years, but it's
in that share it's sort of big, I guess, so
in that sense, demand would probably still be less compared
(11:21):
even to the net capacity growth, so you would have
that pressure. You know, maybe they'll balance out or maybe
there'll be a bit more sort of net capacity grow
than demand for for the next few years. So I
think that structural aspect is with us for to stay
for for the next few years.
Speaker 5 (11:41):
Thank you. Raman Daniel. What's your read on the supply
side of the equation?
Speaker 6 (11:46):
I mean, if you look over the last ten years,
I think the nominal capacity has outgrown shipped volumes with
a factor of two over the last ten years. Yes,
and then you have slow steaming and all of these adjustments.
But really that's sort of where we are.
Speaker 5 (12:02):
I think.
Speaker 6 (12:04):
I'm not going to downplay tariffs and zuopilitories. I think
the biggest culprit or the biggest unknown and uncertainty is
why maybe let me rephrase that, is that it hasn't
been any scrappings. I mean, if you look at January
through August this year, and you compare the same period
every year in the last I think thirty years, you've
(12:25):
had two periods. So we had four thousand videos being
scrapped January to August.
Speaker 5 (12:29):
You have two periods since ninety six where.
Speaker 6 (12:32):
You've had as low or lower, which is twenty twenty two,
which is not really representable in two thousand and five
when the industry was in a growth mode. Now, as
long as we are adding more and more capacity every
year and we're not scrapping, it's going to just reinforce
when the negative effect.
Speaker 5 (12:52):
Hits this market.
Speaker 6 (12:54):
So the industry needs to start scrapping. I'm not a
scrapping strategist, so I don't know why there is not
being done, but that needs to be done on a
grand scale in order to mitigate the next couple of
years when it comes new capacity on the market. So
that is something that we've been writing about a lot.
(13:14):
Everybody knows about it, but yet scrapping remains limited. So
I think that's the problems that we are viewing here,
to be honest.
Speaker 5 (13:22):
Great, thank you, Daniel.
Speaker 4 (13:24):
Let's turn to freight rates now, which have been very
volatile to say the least since the pandemic. What's your
outlook for twenty twenty six in terms of container shipping
freight rates? Do you see signs of stabilization or maybe
further swings or downside risk here? Rama anything to add
on freight rates.
Speaker 2 (13:43):
We do think the rates where they are, there is
maybe more downside through the year or into next year.
We have profitability levels at least currently for container shiping
companies which are still higher than their long term averages
at what twenty percent done margins, so there may be
a way for them to go down, and there is
(14:05):
usually a lag between rates and profitability. Having said that, yes,
we might read some sort of a floor, you know,
maybe not a lot to fall for the race from
where they are. One of course caveat is the Red
Sea again transit situation. If we have sudden, suddenly that
extra affective capacity coming on, I don't know how much
(14:28):
more they can fall because of that, but there is
a bit downside.
Speaker 6 (14:31):
Yeah, we have a different view, by the way, but
we can well, I think we've clearly seen if we
if we'll go to take a step back to before
the red CEA situation we were predicting negat a little
bit more gern starting from Q four twenty three, which
also happens, and the capacity management that we are talking
(14:56):
about here, I think we believe that that was going
to happen well, but if we look at what happened
during just before October seven, there was that capacity management.
When rates were falling off the cliff, it didn't happen,
and we grew more skeptic to that that capacity management
in a market that is heavily oversupplied is going to stick,
(15:19):
because if we look at history, that has more or
less never happened before. And I do do not think
that all of the sudden, the industry will start just
parking ships or you know, going five knots traveling five
in a split of five knots to save for retreats,
because we know that they wanted to increase utilization. So
(15:39):
we have a little bit of a different view there.
Speaker 5 (15:42):
Well, thank you all.
Speaker 4 (15:43):
Before we wrap up, I just wanted to ask one
final question, maybe starting with you, Daniel, in thirty seconds
or less, could you please just share your biggest positive
catalyst and biggest risk you see on the container shipping
horizon for twenty twenty six.
Speaker 6 (16:00):
Well, I mean, I hate to say it, but the
positive would be that we have increased in geopolitical tension
that would in some way distward supply chains, because that
is how the industry has been has been supporting the industry.
On the negatives, I'm a little bit afraid of what
is going to come out of the MPC meeting and
(16:20):
what's going to be the final vote, because if we
look at the curve that they have proposed, no one
can can adhere to that curve in terms of emissions.
If we look at twenty thirty twenty thirty four, even
with the most efficient challenged ships, it's not going to
be able to Everybody is going to have to pay
a penalty. So that is what we are focusing right now,
assessing what is going to come out from the IMO
(16:42):
over the coming months or so.
Speaker 5 (16:44):
Thank you Daniel Raman. What's your perspective.
Speaker 2 (16:49):
Yeah, I think key upside is of course one, as
An said, supply to dislocations, you know, which which could
lead to spike and rates. And also if we have
easying geopractical tention, that's a sort of more medium to
longer term. Positively, if there is more predictability in terms
of demand, it's it's you can have better planning for
(17:09):
CONTENTI shipping companies and hence overall positive. So that's that's
how we look at it. On the negative side, uh,
you know, listening trade conflicts you know, is a risk
that remains apart from the Red Sea situation.
Speaker 5 (17:25):
Great well.
Speaker 4 (17:25):
On this positive forward looking note. Our time is up.
A big thank you for our credit panel.
Speaker 1 (17:32):
Thank you Stefan. That was an interesting conversation. Also, we'd
like to thank the panelists Moody's, Daniel Harlan and fetches
Raman Singla for their insights. I also want to thank
you for tuning in. If you like the episode, please
subscribe and leave a review. We have lined up a
number of great guests for the podcast, so please check
back to hear conversations with C suite executives, shippers, regulators,
(17:55):
and decision makers within the freight markets. Also, if you
want to learn more about the freight trend disputation markets,
check out our work on the Bloomberg terminal at big
and on social media. This is Lee Glasgow siding Off.
Thanks for talking transports with me. Talk to you soon.
Hi everyone, this is Lee Clascow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clasgow, senior freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the world. A quick public service announcement
before we dive in. Your support is instrumental keep bringing
(00:29):
great guests and conversations to you, our listeners, and we
need your support. So please, if you enjoy this podcast,
share it, like it and leave a comment. And if
you have any ideas or feedback or just want to
talk transports, I'm always happy to connect. You can find
me on the Bloomberg terminal LinkedIn, or on x at Logistics.
Speaker 2 (00:47):
Lee.
Speaker 1 (00:48):
Today we're going to do something a little different. This
episode will be co hosted by my Bloomberg Intelligence colleague,
Stefan Covicheck. Based in London, Stefan has over thirteen years
of credit experience, with a focus on European high yield
and crossover issuers. Prior to joining Bloomberg in twenty eighteen,
he was a high heeled analyst at RBS covering European industrials,
(01:13):
transportation and service companies. Stephen moderated a panel at a
Bloomberg Intelligence Shipping event at our London offices on September sixteenth.
The event was in conjunction of London International Shipping Week.
Welcome to the podcast, Stefan.
Speaker 3 (01:28):
Hi Lee, thanks for having me. We had a great
discussion with two credit rating analysts covering container shipping, Daniel
Harld of Moodies and Raman Singla of Fitch. We focused
on three teams that could shape the sector in twenty
twenty six. Number one tariffs. US tariffs are disrupting trade
flows and injecting uncertainty into shipping networks. Tariffs have already
(01:53):
pulled demand forward, creating a risk of software activity in
late twenty twenty five and into two twenty twenty six.
Number two structural overcapacity. The global container fleet is projected
to grow by eleven percent by n twenty twenty six,
while trade volumes are expected to rise only about five percent.
(02:15):
This gap could pressure freight rates and margins across the sector.
And number three, the financial resilience of carriers. Despite the
weak market outlook, liners are entering twenty twenty six with
historically strong balance sheets. This could buy the invaluable time
to face near term risks. According to our panel, overall,
(02:36):
the panel struck a cautious tone. While liners are better
positioned than in past downturns, weaker create metrics look likely
in twenty twenty six.
Speaker 1 (02:47):
Well let's hear what panel had to say.
Speaker 4 (02:49):
Good afternoon everyone, and welcome, welcome back. My name is
Stefan Kovachev, senior credit analyst covering cyclical industrials and container
shipping here Intelligence in London. So today we will be
discussing container shipping outlook with a specific focus on challenges
and opportunities for twenty twenty six.
Speaker 5 (03:12):
And for this.
Speaker 4 (03:12):
Discussion, we are very fortunate to have a wonderful panel
here with us bringing together the big three credit rating
agencies who will share in a minute their view on
the outlook for container shipping. I'm delighted to welcome Daniel Harltt,
senior credit officer for container Shipping at Moodies.
Speaker 5 (03:34):
Great to have you, Daniel, Thank you.
Speaker 4 (03:36):
Completing our panel is Rama and Singla, director at Fitch
Ratings covering transportation. Lock you Raman, So let's dive right
in to give the audience a clear baseline. In one
or two sentences, could you summarize your twenty twenty six
outlook for container shipping Raman, what's your take?
Speaker 5 (03:59):
Well?
Speaker 2 (03:59):
Thanks, I probably would not be saying anything. No, very different.
We also have a deteriorating outlook with the expectation that
supply side will keep on exceeding the demand side, so
we'll have downward pressure on rates, And on top of that,
we have the risk of red seat transits normalizing. If
(04:19):
that would happen, we would have a significant increase in
effective capacity, which would further put pressure on rates. So
overall still negative.
Speaker 5 (04:28):
Thank you. Remen Daniel, what's your take on outlook?
Speaker 6 (04:30):
Be funny if I said that it's going to boom
next year, etstead No, I think. I mean we've been
saying since before the October seven attack that next year
is going to be weak because of over capacity, and
now we are sitting the second or third year in
a row saying it's going to be weak because of
(04:51):
persisting overcapacity. Now we do think that it's going to
be weak. The question is just one again. We know
about the overcapacity, We know that the fleet has grown
substantially more than the underlying demand.
Speaker 5 (05:04):
And that we have a in.
Speaker 6 (05:06):
Basically, if atri is being inflated by shortage of capacity,
that isn't really there because there is a structural overcapacity.
So if it's going to happen in twenty six or not,
I don't know. But as if we go back to
a normalized so S canal and other factors that are distorting,
then yes, twenty six would be a really really weak
(05:29):
year for the container shiping industry.
Speaker 4 (05:31):
That's clear, Thank you, Daniel. Turning to the keyword tariffs.
How damaging our tariffs for container shipping and this is
the sector in a much weaker position today if we
compare to let's say a year ago on the back
of trade policy.
Speaker 5 (05:48):
Raman, what is your perspective on tariffs.
Speaker 2 (05:51):
Yeah, so, I think before the tariffs hit US in
April or the announcement came through, I think the expectation
for the global container volume growth for this year was
closed about four percent or so. I think Once the
announcement came out, the expectation from sort of bigger market participants,
(06:11):
some of which are here, was that we might see
slightly negative growth. And I'm talking about at global levels,
you know, so not only US, China, and since then
with some clarity happening in terms of great deals coming
through or some postponement, I think the current expectation is
we will probably be one to two percent below our
(06:33):
pre Tireft announcement expectations. So there is some impact. There
will probably be some impact next year also as we
analyze the impact this year into next year. But then
there is probably be a medium to longer term impact
if we see changes in supply chains in terms of
manufacturing capacity shifting and given in my view, given the
(06:54):
way the routes are right now, so one is the
volume impact, but in terms of the time mile uh demand,
I do not see a benefits probably been been negative.
We might just end up that that production capaccy shifting
closer to us or or the same distance, so we
be not really adding ten multimand in that sense. So
(07:15):
these are two negatives of you know, so overall sort
of volume demand going down and done miles not really
increasing or maybe maybe maybe likely decreasing. The third factor,
of course, is which can be sort of somewhat perversely positive,
is the supply chain situation or supply chain dislocations, which
is what we have seen in the last three years.
You know, with bort congestion and and and and the like.
(07:38):
Difficult to that. That is very difficult to predict. But
if that were to happen, you know, you could have
short term benefits, short term rates going up, which has
been positive for the industry for example last year. So
overall negative, but you could have short term blips.
Speaker 4 (07:52):
Right, Thank you, Aramen Daniel. Let me bring you in
with the next question. How resilient is the sector's credit
profile heading into twenty two twenty six and do you
expect cash burn, higher leverage and worsening credit metrics for
the company that you cover.
Speaker 6 (08:06):
That's a headline if I say yes to that, But
I would say if we take a step back, and
if we look at the ten largest container shipping companies,
but we exclude the ones without public balance, it's so
so they generate around sixty they have sixty percent of
the capacity in the market. When we went into COVID
(08:27):
Q one twenty twenty, so end of March ten, twenty twenty,
this guy, so it's eight nine companies. They had sixteen
billion in total of cash and short term investments on
their battleship. In Q two twenty five, they had ninety
six billion, So I think what we need to Yes,
there are a lot of challenges in the market, but credit,
(08:48):
the credit ratings and credit profile that we assess is
we do not fool ourselves saying we are very good
at predicting freight rates and how the market is going
to develop. We assess how these company is, how they
come to the market, they serve, so, what capital structure
they have, How does balances look like?
Speaker 5 (09:06):
Do we expect weaker.
Speaker 6 (09:08):
Metrics in twenty six cash burn and the other negatives
you said most likely? Yes, But I think the balance
its I mean they have with the exception of maybe
twenty three to twenty four. They've never entered and I've
written this line I think fifteen times, but they've never
entered the downturn with stronger balance sheds. And I think,
as people alluded to before, I think that goes to
(09:30):
many modes of shipping, but especially container shipping. We have
really strong balance shes right now.
Speaker 5 (09:37):
That's true.
Speaker 4 (09:37):
Indeed, Raman, let me turn to you with a supply
side question. I couldn't new ship deliveries or easing geopolitical
disruptions create excess capacity and put pressure on the industry
to counterbalance this more positive outlook we just heard.
Speaker 2 (09:54):
Sure, well to throwut one metric. We have book currently
at about thirty percent of current fleet globally, which is
the highest level in more than a decade. You know,
two thousand and eight was a time when we had
like something like sixty percent, but different times, so thirty
(10:15):
percent that would indicate an annual gross capacity addition somewhen
mid two high single digics. For a few years to come.
You know, you will have that sort of that that's
at the gross level. So of course you could have
self help measures like scrapping, like slow steaming, but how
(10:35):
much would they help, Not sure? In terms of demand.
You know, historically container shipping volume growth used to be
about two terms of global GDP growth. That used to
be this long held rule of thumb. I think it
has come down to more like one and a half
times now on average the last few years. You know,
(10:57):
given that container shipping is fairly saturated in terms of
its share of global trade, global merchandise trade, it has
grown a lot over the last thirty years, but it's
in that share it's sort of big, I guess, so
in that sense, demand would probably still be less compared
(11:21):
even to the net capacity growth, so you would have
that pressure. You know, maybe they'll balance out or maybe
there'll be a bit more sort of net capacity grow
than demand for for the next few years. So I
think that structural aspect is with us for to stay
for for the next few years.
Speaker 5 (11:41):
Thank you. Raman Daniel. What's your read on the supply
side of the equation?
Speaker 6 (11:46):
I mean, if you look over the last ten years,
I think the nominal capacity has outgrown shipped volumes with
a factor of two over the last ten years. Yes,
and then you have slow steaming and all of these adjustments.
But really that's sort of where we are.
Speaker 5 (12:02):
I think.
Speaker 6 (12:04):
I'm not going to downplay tariffs and zuopilitories. I think
the biggest culprit or the biggest unknown and uncertainty is
why maybe let me rephrase that, is that it hasn't
been any scrappings. I mean, if you look at January
through August this year, and you compare the same period
every year in the last I think thirty years, you've
(12:25):
had two periods. So we had four thousand videos being
scrapped January to August.
Speaker 5 (12:29):
You have two periods since ninety six where.
Speaker 6 (12:32):
You've had as low or lower, which is twenty twenty two,
which is not really representable in two thousand and five
when the industry was in a growth mode. Now, as
long as we are adding more and more capacity every
year and we're not scrapping, it's going to just reinforce
when the negative effect.
Speaker 5 (12:52):
Hits this market.
Speaker 6 (12:54):
So the industry needs to start scrapping. I'm not a
scrapping strategist, so I don't know why there is not
being done, but that needs to be done on a
grand scale in order to mitigate the next couple of
years when it comes new capacity on the market. So
that is something that we've been writing about a lot.
(13:14):
Everybody knows about it, but yet scrapping remains limited. So
I think that's the problems that we are viewing here,
to be honest.
Speaker 5 (13:22):
Great, thank you, Daniel.
Speaker 4 (13:24):
Let's turn to freight rates now, which have been very
volatile to say the least since the pandemic. What's your
outlook for twenty twenty six in terms of container shipping
freight rates? Do you see signs of stabilization or maybe
further swings or downside risk here? Rama anything to add
on freight rates.
Speaker 2 (13:43):
We do think the rates where they are, there is
maybe more downside through the year or into next year.
We have profitability levels at least currently for container shiping
companies which are still higher than their long term averages
at what twenty percent done margins, so there may be
a way for them to go down, and there is
(14:05):
usually a lag between rates and profitability. Having said that, yes,
we might read some sort of a floor, you know,
maybe not a lot to fall for the race from
where they are. One of course caveat is the Red
Sea again transit situation. If we have sudden, suddenly that
extra affective capacity coming on, I don't know how much
(14:28):
more they can fall because of that, but there is
a bit downside.
Speaker 6 (14:31):
Yeah, we have a different view, by the way, but
we can well, I think we've clearly seen if we
if we'll go to take a step back to before
the red CEA situation we were predicting negat a little
bit more gern starting from Q four twenty three, which
also happens, and the capacity management that we are talking
(14:56):
about here, I think we believe that that was going
to happen well, but if we look at what happened
during just before October seven, there was that capacity management.
When rates were falling off the cliff, it didn't happen,
and we grew more skeptic to that that capacity management
in a market that is heavily oversupplied is going to stick,
(15:19):
because if we look at history, that has more or
less never happened before. And I do do not think
that all of the sudden, the industry will start just
parking ships or you know, going five knots traveling five
in a split of five knots to save for retreats,
because we know that they wanted to increase utilization. So
(15:39):
we have a little bit of a different view there.
Speaker 5 (15:42):
Well, thank you all.
Speaker 4 (15:43):
Before we wrap up, I just wanted to ask one
final question, maybe starting with you, Daniel, in thirty seconds
or less, could you please just share your biggest positive
catalyst and biggest risk you see on the container shipping
horizon for twenty twenty six.
Speaker 6 (16:00):
Well, I mean, I hate to say it, but the
positive would be that we have increased in geopolitical tension
that would in some way distward supply chains, because that
is how the industry has been has been supporting the industry.
On the negatives, I'm a little bit afraid of what
is going to come out of the MPC meeting and
(16:20):
what's going to be the final vote, because if we
look at the curve that they have proposed, no one
can can adhere to that curve in terms of emissions.
If we look at twenty thirty twenty thirty four, even
with the most efficient challenged ships, it's not going to
be able to Everybody is going to have to pay
a penalty. So that is what we are focusing right now,
assessing what is going to come out from the IMO
(16:42):
over the coming months or so.
Speaker 5 (16:44):
Thank you Daniel Raman. What's your perspective.
Speaker 2 (16:49):
Yeah, I think key upside is of course one, as
An said, supply to dislocations, you know, which which could
lead to spike and rates. And also if we have
easying geopractical tention, that's a sort of more medium to
longer term. Positively, if there is more predictability in terms
of demand, it's it's you can have better planning for
(17:09):
CONTENTI shipping companies and hence overall positive. So that's that's
how we look at it. On the negative side, uh,
you know, listening trade conflicts you know, is a risk
that remains apart from the Red Sea situation.
Speaker 5 (17:25):
Great well.
Speaker 4 (17:25):
On this positive forward looking note. Our time is up.
A big thank you for our credit panel.
Speaker 1 (17:32):
Thank you Stefan. That was an interesting conversation. Also, we'd
like to thank the panelists Moody's, Daniel Harlan and fetches
Raman Singla for their insights. I also want to thank
you for tuning in. If you like the episode, please
subscribe and leave a review. We have lined up a
number of great guests for the podcast, so please check
back to hear conversations with C suite executives, shippers, regulators,
(17:55):
and decision makers within the freight markets. Also, if you
want to learn more about the freight trend disputation markets,
check out our work on the Bloomberg terminal at big
and on social media. This is Lee Glasgow siding Off.
Thanks for talking transports with me. Talk to you soon.
Host
Lee Klaskow
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