Friday, April 10, 2015

Shipowners Opinions on Outlook Vary with Freight Shipping Sector More Optimistic than Offshore

Norwegian Report Looks Into the Future
Shipping News Feature

NORWAY – WORLDWIDE – As owners of the worlds sixth largest shipping fleet measured by market value, the aspirations and opinions of Norwegian ship operators is always worth attention. This week the Norwegian Shipowners’ Association has published its Outlook report for 2015 yet, despite that fact the country’s freight carrying tonnage has trebled in the past decade, the opinion for the next twelve months is less optimistic than last year regarding both turnover and profitability.

Falling oil prices, heightened geopolitical tensions, and sluggish, uncertain growth in the global economy are all factors seen as directly impacting the maritime industry with shipowners less optimistic regarding their profitability in 2015 than they were in 2014. In all 35% of shipowners expect improved operating results on the year, compared to 72% in 2014. 42% of shipowners anticipate weakened operating results in 2015, a dramatic increase from only 8% last year.

Shipowners are also more pessimistic regarding access to capital. In 2014, around half of shipowners reported that access to capital was good or very good, while today only one out of four report the same. As regards laid up vessels as we head into 2015 Norwegian Shipowners’ Association members had 26 vessels in storage, of which 20 were ships and six were mobile offshore units. Which CEO Sturla Henriksen expects to increase significantly quoting the number of vessels in storage to rise, to 42 by the end of 2015 (29 ships and 13 rigs). Henriksen commented:

“We have seen a marked negative shift in just a short time. 2015 will be a challenging year for Norwegian maritime companies, but we must be prepared for 2016 to be even more challenging. The industry itself is doing all it can to survive in these challenging times, and we are encouraged by the signals sent out by the government before Easter indicating changes in the rules governing paid leave.

“We also have high expectations for the new maritime strategy, which the government has said will be released during the spring. We consider four items to be of particular interest in the strategy: a competitive shipowning tax; strengthening the Norwegian flag by relaxing Norwegian cabotage rules; a strong net wage scheme to encourage employment of more Norwegian seafarers; and improved terms of private ownership. One thing we know: Proactive policies yield good results, even in challenging times.”

The offshore segment shows the clearest shift with offshore service shipowners owners expecting a 4.2% drop in turnover this year, the first since 2002. Rig owners expect growth in turnover of 9.1% in 2015. This is an ambitious figure given that investment on the Norwegian Continental Shelf is expected to fall by approximately 10% in 2015. Many contracts will be fulfilled during the course of the year. For 2014, offshore contractors experienced growth of just 2.2%.

The picture for traditional shipping is not as bleak. Deep sea shipowners foresee an increase in turnover of 5.1% in 2015, compared to actual growth of 3.2% in 2014. Short sea shipowners have seen moderate but stable annual growth, and anticipate turnover to rise by 2.5% in 2015. Actual growth for this segment was more than 5.5% in 2014.

The maritime cluster makes up one of Norway’s largest and most important industries being the most important export industry after oil and gas with 110 000 employees, and with 30-50% of all business in many coastal communities. The industry’s contribution to state and local tax income is also significant. Tax income from the maritime industry is 80% higher per employee than in other private Norwegian industry.

A comprehensive programme of fleet renewal has seen the average age of ships in the Norwegian fleet go down by nearly three years since 2007, average vessel age is currently 11 years. However whilst the Norwegian foreign-going fleet has grown by more than 150 ships in the past decade, the percentage of Norwegian-flagged ships has gone down, however, to 42% compared to 60% ten years ago.