Maintaining negative-to-stable outlook for the shipping sector for FY17, India Ratings and Research (Ind-Ra) today said the tanker segment will perform better than others.
"The tanker segment, which accounts for the bulk of the fleet operated by Indian shipping companies (about 60 per cent), is likely to continue performing better than other shipping segments due to its sound fundamentals," it said in its report.
However, the dry-bulk, off-shore and container segments will remain under pressure in 2016-17.
The agency attributes the likely improvement in the tanker segment to healthy demand, manageable supply growth and continuation of the recent increase in long-haul shipments from West Africa to Asia.
"After the fall in crude oil prices, tanker charter rates had increased rapidly in 2015 owing to a higher crude oil output, strategic reserve stock-piling and floating storage. However, charter rates declined in the fourth quarter of FY16 as the incentive of storing oil has reduced with oil prices remaining range-bound," it said.
The agency expects the charter rates to decline further in 2016-17. Nevertheless, the correction will be limited as demand for oil is likely to continue to grow at a healthy pace.
Assigning a negative outlook for offshore segment, it "does not expect a significant recovery in oil prices in FY17 and therefore, expects offshore exploration activity to remain muted globally, which will result in continued pressure on charter rates".
Revenue of Indian companies that have deployed vessels on overseas waters declined during the nine months of 2015-16 as a result of the drop in demand for offshore drill ships, jack-up rigs and other support vessels, which resulted in lower charter rates.
According to Ind-Ra, financial profiles of such companies are likely to weaken further in 2016-17.
"The agency expects Indian public sector units to continue offshore capex activities in FY17. However, charter rates are likely to be renegotiated at lower levels when vessel contracts come up for renewal," it said.
Consequently, the financial profiles of companies catering largely to public sector units are also likely to deteriorate in 2016-17, it added.
Assigning negative outlook for the dry bulk segment, it said the agency expects this category to be the worst-performing in the shipping space in FY17.
The slowdown in emerging and developing economies, particularly in China, has exacerbated the demand-supply mismatch in the dry-bulk segment, it added.
