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

Wednesday, 12 February 2020 | 12:00

The coronavirus outbreak in China is credit negative for Asia-Pacific’s port operators as it is disrupting domestic and global supply chains and lowering discretionary consumer spending, which will reduce the throughput growth of Asia-Pacific’s ports in 2020.

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

Pertaining to container ports, extended factory shutdowns in China and containment measures in Asia-Pacific countries have hampered manufacturing and logistics sectors, said Moody’s.

“We expect these factors will reduce container throughput growth especially at Chinese ports such as Shanghai International Port (Group) Co., Ltd and transshipment hubs such as PSA Corporation Limited,” it said.

Some shipping companies, such as A.P. Moller-Maersk A/S and CMA CGM S.A., recently announced blank sailings — reducing vessel calls to China — reflecting weakened output from China and low global trade activity because of the outbreak.

The current production slowdown in the dragon country will create a backlog of orders that will result in deferred growth of trade activity once the situation improves, it said.

At bulk cargo handling ports, due to production stoppages in China, Moody’s expects energy demand in the country to decline 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 expects the coronavirus 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 companies because their exposure to the cruise segment is small,” it said.
Source: Business Standard

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