Extended trade war will strangle growth at China’s busiest ports, Moody’s says
- Tit-for-tat tariffs, lower handling charges to further squeeze port operators in China in the next 12 to 18 months, says the US financial services company
- Rating agency highlighted negative impact on credit profile of China Merchants Port Holdings, Hutchison Port Holdings and Shanghai International Port
The escalation and extension of the year-long trade war between the two largest economies on Earth will choke the growth of China’s container shipping business over the next 12 to 18 months, according to a report by Moody’s Investors Service.
Annual growth rate in container throughput may be knocked down to zero or a low single-digit percentage, from 4.7 per cent in 2018, and 8.3 per cent in 2017, Moody’s said.
Port handling charges, measured by the average revenue per 20-foot equivalent unit (TEU), are also expected to decline, which will erode the total revenue and profit margins of China Merchants Port Holdings, Hutchison Port Holdings and Shanghai International Port, three port operators whose debt are rated by Moody’s.
“We expect US-China relations to remain contentious and trade negotiations to continue for some time even if the two countries reach a trade agreement, resulting in a difficult operating environment for China’s port sector,” said Moody’s analyst Ralph Ng.
The decline in container throughput will further squeeze Chinese port operators that are already under pressure from overcapacity and consolidation, while possible economic stabilising policies that require cutting handling charges may further weigh on their credit profiles, Ng said.