Chinese offshore shipyards have had the toughest year yet.
2017-03-20 09:00
The offshore engineering industry will continue to be mired in a quagmire of oversupply of vessels. As of now, more than 400 offshore support vessels (OSVs) are scheduled for delivery this year, a record high, with over one-third of these orders ultimately undeliverable. For Chinese offshore shipyards, which hold over 60% of the orders, 2017 is destined to be a year of struggle.
Over 400! 2017 OSV Deliveries to Hit Record High
VesselsValue recently released a report predicting that 465 offshore support vessels (OSVs) will be delivered and put into operation in 2017, a record high. Statistics show that 15 OSVs have already been delivered this year. Currently, there are 456 OSVs in the global order book, with 450 scheduled for delivery this year and only 6 for delivery in 2018.
Clarkson's statistics are slightly lower than VesselsValue's. 342 OSVs are expected to be delivered and put into operation in 2017, also a record high. Statistics show that 22 OSVs have already been delivered this year. Currently, there are 453 OSVs in the global order book, with 320 scheduled for delivery this year (70.64% of the total OSV order book). A further 129 are scheduled for delivery in 2018 and 4 in 2019.
Shipbuilders Become Ship Owners! Shipyards are the Largest Holders of Orders
With falling oil prices and declining demand for offshore projects, the asset prices in the offshore engineering industry have fallen to their lowest point in history, leading to the bankruptcy of many offshore vessel owners. The number of idle OSVs worldwide has reached approximately 1800, with fleet utilization rates as low as 40%. These factors mean that a large portion of the order book will ultimately not be delivered and put into operation.
Tor Allen Widing, Managing Director of Fearnley Offshore Supply, recently stated that as much as one-third of current OSV orders may not be delivered. Due to the severe market downturn, even if an OSV has had its keel laid, there is no guarantee that it will be successfully delivered. For example, some Chinese shipyards have received orders and started construction, only to go bankrupt later, leaving the new vessels essentially as piles of rusting sections on the beach. Even if the market recovers in the next two years, ship owners will likely opt to order new vessels directly rather than complete construction of these existing ones.
Just a few days ago, Venkatraman Sheshashayee, CEO of Miclyn Express Offshore (MEO), stated that nearly 400 newly built OSVs in Chinese shipyards are complete, but before they can be delivered and put into operation, these new vessels will only continue to age; within a year, these newly built OSVs will be older than five-year-old OSVs.
The latest data from Clarkson shows that there are 453 OSVs in the global order book, with Chinese shipyards holding 299 orders, accounting for 66% of all orders. Of the top 10 shipyards globally with OSV orders, 9 are Chinese.
The market remains sluggish, and oil prices continue to plummet. Sheshashayee's words are not alarmist; for Chinese offshore shipyards, which hold the vast majority of orders, 2017 will likely be a year of hardship.
