A P Moller-Mærsk has seen its credit rating downgraded at Moody’s over concerns about lower economic growth and the US-China trade war.
The world’s largest container line, which had been on negative outlook since August 2017, saw its Baa2 rating cut to Baa3.
“The downgrade reflects our expectation that Maersk will face increased market and execution risks,” said Maria Maslovsky, Moody’s lead analyst for Maersk.
“The downgrade further reflects significant downside risks facing the container shipping industry, in Moody’s view.”
The rating agency said the broad economic growth globally is expected to be “less robust” in 2019, while global trade, the key demand driver for container shipping, is also likely to “come under pressure”.
It said this trend was further exacerbated by the overhang of the US-China trade tensions, although there have been recent signs that a trade war may be avoided.
While the supply of new vessels in 2019 is expected to be low owing to a multi-year trough of the orderbook, Moody’s said weak demand could “pressure freight rates and earnings”.
In addition, it said the the container shipping industry struggled with the lag in passing through increasing bunker costs in 2018 and will need to pass through additional increased fuel costs associated with IMO 2020.
However, Moody’s said it did acknowledge Maersk’s “leadership position” as a liner and container terminal operator.
Maersk holds respectively number one and number four positions in containers and terminals globally.
Moody’s said it viewed the terminals business, which contributes close to 20% of Maersk's ebitda, as “more stable than liner operations” and that the “significant investment in terminals” sets it apart from its peers.
In addition, Moody’s said the shares in French oil company Total, worth about $5bn, offered “significant financial flexibility” which allows Maersk to continue with its transformation while at the same time protecting its balance sheet.
