China’s slower growth and economic transition will pose significant risks for the shipping sector, which already faces overcapacity, weak freight rates and stretched financials, Fitch Ratings said in a report out yesterday.

These pressures will probably lead to bankruptcies among smaller unrated shipowners and may drive consolidation. Dry bulk and potentially container shipping are most at risk while tanker shipping is likely to fare better, the ratings agency reckoned.

With iron ore and coal representing well over half of the seaborne dry bulk demand, dry bulk shipping is most exposed to the transition of the Chinese economy. China’s coal imports plummeted by 15% in 2014 and a further 32% year-on-year in the first eight months of 2015. Its iron ore imports were marginally down in the first eight months of this year.

Several small dry bulk shipping companies have filed for bankruptcy and more are likely, Fitch said.

“[H]arsh sector fundamentals” was also driving consolidation in the sector, led by the potential merger of Cosco and China Shipping, Fitch noted.