03 Juni 2016

[030616.EN.BIZ] Watching Over Idled Ships of All Types in SE Asia is a Thriving Business Sector

LOOKING after mothballed ships has become big business in Southeast Asia amid the current climate of China's economic slowdown, excess container ship capacity, dangerously low freight rates, and sub-par oil prices.

This situation has led to all sectors of the maritime shipping industry being hit hard from container shipping, with legions of mega ships due to arrive this year and next, Reuters reports.

These were ordered during the hey day of demand when east-west trade lanes were thriving, to offshore vessels now that the oil giants are cutting back on exploration and deepwater drilling.

Currently, 1,300 offshore support vessels are lying idle worldwide, according to chief operating officer at PACC Offshore Services Holdings, Lee Keng Lin.

Most of them are in "cold lay up", whereby the ship is shutdown and the crew laid off as they are not expected to work for about one year. The practice can cut costs by 80 per cent.

A cluster of companies that help preserve equipment and provide security for vessels stuck in maritime carparks around Southeast Asia are busier than they have been for years.

A popular lay-up anchorage near Indonesia's Batam island is growing crowded, and firms such as Ocean Shipcare and Brubay Shipcare are running out of space at another at Brunei Bay, near Labuan, off northern Borneo.

"Where do we go next? It's a good question, because we are trying to explore some other areas also," said base manager Kanen Senasendram at Ocean Shipcare, which operates in Brunei Bay. He says he may need to hire more staff.

Wilhelmsen Ship Management says it has 60 ships in its lay-up care in Brunei Bay - the highest since the depths of the global financial crisis in 2009.

"This is the busiest I have seen the lay-up industry for a long time, probably since at least 1993," said managing director of shipping services firm Marine Assurance, Phil Shearer. "1993 was bad, but the container and bulk markets were not also down."

Soaring output has left global oil markets awash with crude, causing traffic jams of tankers at ports in the Middle East, China and global storage hub Singapore, as buyers take advantage of cheap fuel.

But the glut has also driven oil prices down by up to 70 per cent since 2014, sharply reducing demand for offshore vessels such as drillships, and also for oil rigs.

For companies with strong balance sheets the market turmoil represents an opportunity to replace old fleets cheaply, Mr Shearer said. A recovery in oil prices to US$65-70 a barrel would start to reactivate idled vessels, said shipbroker Banchero Costa.

Source : HKSG.

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