Posted by: donmihaihai | May 3, 2009

Lemming once, Lemming again?

While it is not as serious as 1980s, charterers are slow in paying their bills.

Vessels and barges laid up at Bollinger’s “Safe Harbor” in Larose, Louisiana have doubled to approx. 45 vessels since December 2008. Inland drilling rigs, AHTSs, OSVs, tugs, deck barges, tank barges and inland tugs dominate the landscape. Although equipment is being stacked in the Gulf, it nowhere near approaches the vessels cold-stacked in the bayous twenty and thirty deep in the mid-80s when owners, finance companies and the U.S. Maritime Administration laid up fleets. Only a small percentage of today’s idle equipment is starting to show up for sale, and not at bargain prices.

 

Crosby Tugs

of Galliano reports their present fall-off in work is worse than what they suffered during the mid-80s, but I note that their fleet is also substantially larger than the mid-80s after acquiring 14 offshore tugs from Tidewater three years ago. Like many operators, they are coming off a high. Another Gulf Coast owner who requested anonymity plans to move out of the domestic “shallow-water” market so as to concentrate further offshore and in international waters where he feels there may be more stability. One operator went for thirteen days straight without even an inquiry. Some companies report that while their boats are working, many charterers are slow in paying their bills.

 

 

Lemming!!

Marcon still has on its bookshelves copies of Fleet Data Service’s “Offshore Service Vessels” and “Offshore Tugs” from 1985 covering the U.S. market. There were 173 tug companies and 94 owners / operators of large offshore service vessels listed. 101 (58.4%) of the offshore tug companies and 78 (83%) of owners/operators of the large OSVs (at that time anything over 150’ was considered  “large” ) no longer exist. Some just faded away. Others were acquired by very familiar corporate names who themselves may no longer exist as they also were acquired by yet another familiar name. Fourteen creditors were also listed as Owners. Much of the equipment though continued working somewhere in the world experiencing the up and down cycles of earning revenues or lying idle. It is all part of the marine industry that we need to be prepared for. 

I don’t like to quote what I read elsewhere, but at least someone is sensible enough.. the cost of vessel is part of “the cost of providing the service”. Like investing, the time to get cheap vessel is when “investors” are fleeing, while it is hard to know when is the best time to buy, at least avoid being a Lemming!! For Jaya while it is hard for them to escape unhurt, at least it is pretty clear that they are selling to Lemmings..

Jan 2009

At a time when most companies are reluctant to spend on capital expenditures,

Scomi Marine Bhd plans to invest some USD 150m in the next three years to expand its fleet. There have been concerns that Scomi Marine, a 43% associate company of Scomi Group Bhd, had not been investing substantially to expand its fleet in the last two to three years to take advantage of the uptrend in activities in the oil and gas and logistics industries. The reason for this, according to president Mukhnizam Mahmud, was the view that prices of vessels were historically very high and not sustainable. “We were concerned that if the market weakened, it would be tough to ensure sufficient returns on investment from the assets. The intention was to ride out the ‘growth’ phase and once the market went into a downturn, prices would be attractive and at a more realistic level.” “We now see that situation occurring and asset prices have fallen,” he told StarBiz in a telephone interview. Mukhnizam said the global credit crunch had affected the shipping industry in terms of financing for shipyards and vessel owners as well as charter rates, which had fallen with the slowing economy, thus contributing to lower vessel prices. The Dry Baltic Index has dropped more than 92% to below 700 points from its all-time high in May. The price of Panamax-sized vessels has also dropped to USD 25m to USD 28m currently from about USD 80m six months ago. “We see the market being in this state at least until the end of 2009. Although prices have not come down much for the type of vessels we are looking at, there have been movements downward. Scomi Marine’s strategy is to take advantage of this opportunity to acquire vessels at lower prices.

 

Jan 2007

Business Edge reports that Scomi Marine Bhd in Malaysia, a leading regional player in the offshore support vessel sector, believes that there will be a continued strong requirement for what it called “high-powered vessels” in view of the high demand for energy globally.

“Vast growth opportunities lie ahead in the offshore support services industry. With the high demand for energy, there is an increase in exploration and production activities, especially deepwater activities,” Scomi Marine chief executive officer Shah Hakim Zain told reporters in Singapore on January 18th.

He said as a reflection of the high demand for offshore support vessels, the utilisation of the company’s vessels had soared to 95 per cent by December 2006 from 85 per cent a year ago.

However, he said the company, which has six new deep-water vessels on order, would not order new vessels due to the long “waiting list” at Japanese and Chinese shipyards and the high price of newbuilds.

“Building costs have risen by more than 40 per cent from 2004 and are expected to remain at current levels. At the same time, spot charter rates for marine support vessels have increased by 10-20 per cent,” he added.

Shah Hakim, who is also the chief executive officer of Scomi Group Bhd, said the seven high-powered anchor handling tugs and supplies (AHT) vessel it ordered in 2005 cost just under US$20 million each (RM70 million) but the same vessel would now cost US$32 million.

“If we were to sell it now, we could potentially get a premium price of US$38 million,” he said.

 

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Responses

  1. I just read an article that says deep sea exploration is still doing well. This may cushion the lemming effect


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