Moody's: Stable Outlook For Global Shipping Industry, But Recovery Hampered By Oversupply

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"While the stable outlook is based on the belief that the main industrydrivers are not likely to deteriorate further, we do not anticipate a full recovery of the main players to start until the end of 2011," says Marco Vetulli, a Moody's Vice President-Senior Credit Officer and author of the report. "Furthermore, we believe the landscape of the industry may be quite different on the other side of the recovery."

In the report, Moody's notes that the long-term drivers of growth remain robust for shippers involved in transporting commodities such as coal, iron ore, oil and grain. These sectors will absorb the number of new vessels scheduled to be on the water in the next few years relatively easily. The rating agency says that although the outlook for container shipping is gloomier because of over-supply, there are other considerations supporting its stable outlook. These include a boost in demand due to an increase in containerisation, which in turn is driven by improvements in ports in emerging economies. In addition, the three largest ports in the world -- Singapore, Shanghai and Hong Kong --have all seen some pick-up in throughput in the past few months.

"Sustainable improvement will require growth in trade flows followed by reduction in capacity, both of which will take some time," cautions Mr. Vetulli. "This means shipping industry dynamics could remain fragile for a number of quarters." However, the rating agency acknowledges that the stronger companies, which include many of its rated issuers, will recover more quickly than the industry average, which could significantly strengthen their market position.

Overall, Moody's expects that credit metrics for shipping entities will remain subdued during the next 12 months and start to recover in 2011. In addition, despite a slow return to more normal conditions in the financial markets, shipping finance will remain tight and banks will remain selective. This means liquidity will remain a discriminating factor in the foreseeable future.The principal methodology used in rating shipping companies is "GlobalShipping Industry Rating Methodology", published in December 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory on Moody's website.

The "Global Shipping Industry Outlook" is available on www.moodys.com.

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For more information, please contact:
Madrid
Paloma San Valentin
Managing Director
Corporate Finance Group
Moody's Investors Service Espana, S.A.
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Milan
Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Telephone:+39-02-9148-1100