Volatile demand for coals and other minerals, congestion, and regulatory risk are the top three risks facing the shipping industry this year, credit rating agency Standard and Poor’s (S&P) Global Ratings said recently.
In its “Industry Top Trends 2018” report, S&P said “commodities-driven ports are exposed to volatile demand for coal and other minerals, such as nickel, lithium and gold, which has been pressuring prices and pushing down the credit quality of miners in recent years.”
“This hampers the financial flexibility of coal port operators,” it added.
The agency, however, said supply-chain expansion offered the industry opportunities in cross-border e-commerce and assembling semi-finshed good from overseas.
“Cross-border e-commerce trade is becoming an important growth driver for port throughput and logistics businesses,” S&P said.
On congestion, S&P said Asian ports are suffering from it, decreasing their performance.
“Some Chinese ports are [having]a capacity glut and competitve pressure because of their overlapped hinterlands and overspending. The trend of government-led port integration aims to achieve cost savings and reduce competition,” S&P said.
“Indonesian ports, despite catering to origin-and-destination traffic, are affected by changing demand and supply patterns within the country, which can decouple performance from economic growth,” it added.
On the third risk, S&P cited rising protectionism and the mixed impact of US President Donald Trump’s tax reform might have a short-term positive impact, but would negatively affect global port operations in the mid-to-long term.
“It may be negative to global trade and global port operators in the mid-to-long term if more manufacturers move back production lines to the US,” the agency said.
“Unexpected negative government intervention for political and economic means will remain a risk,” it added.
S&P also said cuts in container handling fees by major Chinese ports under the regulator’s anti-monopoly claim are dampening their profitability.
The Indonesian government has disallowed investments from some international companies in joint ventures with major port operators after being in operation for many years.
“This has created uncertainties on cash payment, as well as future capital expenditure,” S&P said.