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Port operators to gain from trade upswing, says Moody's
By Karen Yip (China Daily)
Updated: 2010-01-21 07:56
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Asia's three rated port operators - China Merchants, Hutchison Ports, and PSA International - are set to benefit from an upswing in China's trade as exports appeared to have turned the corner, said credit ratings agency Moody's Investors Service in a weekly report to its clients yesterday.
However, a return to pre-crisis levels of trade remains far off. Moody's said despite China's resilience, it expected only a sluggish recovery in the global economy for 2010. As a result, "global trade would rise slowly and, therefore, benefit Asian port operators to a moderate degree".
"A sustained revival in demand from Western countries would benefit the operations of our three rated Asian port operators," said Elizabeth Allen, Moody's Senior Credit Officer in Hong Kong.
"This is just a beginning of the recovery," she told China Daily when contacted. Moody's rates Hutchison Ports "A3", with a negative outlook, while PSAI has a "Aaa" rating with stable outlook. The ratings agency has given a "Baa2" rating with a negative outlook for China Merchants.
China's exports have slowly started to show signs of recovery with December numbers up 18 percent year-on-year, while imports in the same period rose 56 percent, reflecting the country's stimulus-fueled appetite for raw materials.
"Until we see a sustained return in volumes of seaborne trade and spending reductions that succeed in offsetting lower revenues, the financial prospects and related credit metrics of our issuers are unlikely to improve," Allen said.
After years of growth, ports in China and around the world suffered a sharp fall in demand beginning in the second half of 2008 due to an unprecedented decline in global trade that accelerated in the first half of 2009 and is only now beginning to recover.
By the end of 2009, for example, Moody's estimated 12 percent to 15 percent of all ships worldwide were idle as low freight rates made it uneconomical to operate them.
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Singapore's PSAI recently reported a 10 percent annual decline, its first ever, because of depressed demand from the US and Europe.
In 2009, trade at its port in Singapore fell almost twice as much as its overseas terminals, with growth in trade between China and the rest of developing Asia partially offsetting weakness in the West.
In response to this shift in trading patterns, ship owners have redeployed long-haul vessels to intra-Asian trade.
To cope with last year's global economic crisis and depressed demand, all three rated port operators in Asia scaled back their capital expenditure and cut costs. Such measures have helped conserve cash flow and shore up financial positions at a time when capacity utilization in the region has declined.
