Overcapacity still hounds Asian shipping firms in 2010 - Fitch

27 January 2010 06:08  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian shipping companies will still have to contend with overcapacity and low utilization rates this year, which may keep their earnings under pressure, Fitch Ratings said on Wednesday.

Out of the seven shipping firms that Fitch rates based on credit standing, three run the risk of getting a ratings downgrade, including Indonesian chemical shipping giant Berlian Laju Tanker.

The other two were another Indonesian company - Arpeni Pratama Ocean Line and Varun Shipping Co of India, the ratings agency said.

“The oversupply of shipping capacity will continue to exert pressure on shipping rates and utilisation levels in 2010,” Fitch said.

“Fitch notes that weakened earnings, high committed capex (capital expenditures) and restricted access to capital remain challenges for a number of rated shipping companies,” it added.

The ratings firm also rates Thoresen Thai Agencies Public Co Ltd of Thailand, First Ship Lease Trust in Singapore and from India - Shipping Ports and Logistics Ltd and Pratibha Shipping. These four companies would benefit from earnings contribution from non-shipping businesses, Fitch said.

"The overall demand growth for shipping capacity will remain subdued and insufficient to fully absorb additional capacity, leading to an imbalanced market until 2012-2013 for all key shipping segments," Fitch said in its special report on the Asian shipping industry.

Global trading activities were expected to remain mild this year, coming from a sharp decline in 2009.

Based on the World Bank’s projection, trading volumes this year would grow 4.3% this year after shrinking by 14.4% last year.

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By: Pearl Bantillo
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