Coronavirus crisis credit negative for Asia-Pacific port operators: Moody's

Impact on Indian bulk handling ports unlikely due to negligible volumes linked to China

The outbreak of coronavirus in China is credit-negative for Asia-Pacific’s (APAC’s) port operators, given that it has disrupted domestic and global supply chains and has lowered discretionary consumer spending. This will lead to reduced throughput growth of APAC’s ports in 2020.

“We expect the coronavirus outbreak to have a larger negative impact on ports than that of the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS), because China now has a bigger weight in the global economy and the global supply chain is more integrated,” Moody’s Investor Service said in a report.

Pertaining to container ports, extended factory shutdowns in China and containment measures in the APAC region have hampered the manufacturing and logistics sectors, said Moody’s.

“We expect these factors to reduce container throughput growth, especially at Chinese ports such as Shanghai International Port (Group) and trans-shipment hubs such as PSA Corporation,” it said.

Some shipping firms such as A.P. Moller-Maersk and CMA CGM recently announced blank sailings — reducing vessel calls to China — reflecting lower output from China and low global trade activity.

The production slowdown in China will create a backlog of orders that will result in deferred growth of trade activity once the situation improves, the ratings firm said.

Moody’s expects energy demand at bulk cargo handling ports in China to decline on account of production stoppages, leading to associated bulk shipments such as iron ore, oil, liquefied natural gas, and coal taking a hit.

However, rated Indian ports handling bulk commodities are unlikely to be impacted, given they handle negligible volumes linked to China.

Moody’s expect the virus outbreak to reduce cruise activity after the quarantine of cruise ships in Hong Kong and Japan. Containment measures by countries will lower cruise docking at terminals and, therefore, the revenue derived from this business activity.

“That said, the potential reduction of revenue and cash flow from cruises has limited impact on our rated port firms because their exposure to the cruise segment is small,” it said.