China's slower growth and economic transition will pose significant risks for the already struggling shipping sector, rating agency Fitch said on Monday. "Weaker data on exports and manufacturing in China and its economic transition increase uncertainty for container shipping," said Fitch in a report.
China is a key player in global trade, accounting for two-thirds of world iron ore imports, 20 percent of coal imports and 16 percent of oil imports. China's slowing growth will therefore significantly cut demand for shipping services, while oversupply is rife in nearly all shipping segments, according to Fitch.
The rating firm expected global container demand growth to moderate to between 2 and 4 percent this year, compared to its previous forecast of 4 to 5 percent. Oversupply in the sector sinks shipping prices.
The year-to-date average of the China (Export) Containerised Freight Index, a measure of freight prices, is down 16 percent year on year. "These pressures will probably lead to bankruptcies among smaller shippers and may drive consolidation," said Fitch.