<div><em><strong>The tanker segment will remain an exception due to its better demand-supply situation, reports Arshad Khan</strong></em></div><div> </div><div>Citing weak global trade growth and persistent overcapacity, India Ratings and Research (Ind-Ra) has maintained a 'negative-to-stable' outlook for the shipping sector for the current financial year. </div><div> </div><div>"The performance of dry bulk and container operators is likely to continue to be affected by weak global trade growth and persistent overcapacity, while the offshore segment will face the negative impact of lower crude oil prices," the rating agency said in a statement. </div><div> </div><div>The agency, however, believes that the tanker segment, which accounts for a majority of the Indian fleet will remain an exception due to its better demand-supply situation. </div><div> </div><div>The rating agency further assigns sub-sector outlooks for FY16 as follows: </div><div> </div><div><strong>Stable outlook for tanker segment</strong>: Global demand for tankers increased in the first half of FY15 as the sharp drop in crude oil prices resulted in floating storage and onshore stockpiling. The rates, however, will come down gradually during the year as demand will not sustain at the current artificially high levels. Nevertheless, the decline will be limited only to moderate levels as the fundamentals of the segment have improved over the last couple of years with an improving demand-supply scenario. Global capacity additions over the last two years have been only marginal (FY15: 2.2 per cent; FY14: 0.2 per cent).<br> </div><div><strong>Negative outlook for offshore segment</strong>: Exploration and production companies globally have suspended or curtailed expansion plans due to lower crude oil prices, which has impacted the demand for vessels in the offshore segment, leading to lower day rates and utilisation levels globally. The operating performance of companies in the segment is thus likely to weaken in FY16.</div><div> </div><div><strong>Negative outlook for dry bulk segment:</strong> The oversupply in the dry bulk segment along with weaker demand conditions particularly in China kept freight rates low throughout FY15. The agency expects the segment to be under pressure again in FY16 as overcapacity will persist and demand growth will remain subdued.</div><div> </div><div><strong>Negative outlook for container segment</strong>: Continued increase in global container capacity (FY15: 6.2 per cent; FY14: 5.6 per cent) coupled with subdued demand conditions have led to a decline in container freight rates across most routes since the start of 2015. As a result, the operating margins of container operators will decline in FY16. </div><div> </div><div><strong>Impact on credit profiles</strong>: The agency expects the leverage indicators of shipping companies to remain high in FY16 as performance across most segments will be subdued. The credit metrics of companies in the offshore segment will weaken in FY16 as their margins are expected to decline.</div>