Moody's Investors Services has changed its outlook on the global shipping sector to negative.
In a new report, Moody's attributed the downward move to its expectations that supply growth will outpace demand growth across in 2016 by more than two per cent, which will in turn suppress freight rates, particularly in the dry bulk and containership segments.
However, the outlook for the tanker segment will remain stable as low crude oil prices will continue to boost demand for tankers.
Fuel prices, which make up a large cost item for container shipping companies, have continued to fall into over the past six months, but Moody's warns the benefits to the container shipping segment will fade somewhat in 2016 because they have already passed lower fuel costs on to their customers via reduced freight rates, limiting the upside.
"Even though the tanker segment continues to perform strongly, we expect the supply-demand gap for the industry overall to exceed two per cent in 2016, and possibly into 2017, as large new vessel deliveries coincide with subdued demand for dry bulk and container ships," Marie Fischer-Sabatie, Moody's senior vice president, said.
China's slowdown has also continued to weigh on the demand for commodities, such as coal and iron ore, which in turn has affected bulk seaborne transportation demand.
Following ongoing weaker freight rates in the dry bulk and containership segments, Moody's now forecasts a low single-digit percentage decline in aggregate earnings before interest, tax, depreciation and amortisation for the rated shipping companies in 2016, versus growth in the low single-digits in its previous forecast late last year.