SAL: 'Toughen up' in 2016

SAL foresees a challenging market in 2016 as projects continue to be cancelled or deferred, and project freight carriers will have to "toughen up to be capable of withstanding the fights that will inevitably come".

SAL said that despite a short uptick at the start of 2015, the shipping market plummeted over the course of the second half of 2015 hitting the heavy lift, breakbulk, container and bulk sectors. 

The positive start to 2015 pointed to better utilisation factors for the MPV/project carrier fleets, but a sting in the tail came in the form of low oil prices, leading to an unprecedented downturn in the offshore sector.

Geo-political unrest and stagnating global economic growth also contributed to the downturn, said SAL. However, according to the company's chief operating officer Toshi Yamazaki, the most deteriorating factor is an oversupply of vessels in the market, which led to an "evil spiral" on freight rates. 

"With the steady supply of new built vessels we have seen, it is my opinion that many has been built without thoughtful consideration. This I see as a main cause to the troubled conditions," he observed.

Many owners have seen their margins squeezed, despite lower bunkering prices, as the supply of vessels significantly exceeds the volume of cargo offered in the market.

Yamazaki added that on a macroeconomic level, ship owners have no influence and the challenge is to adapt the business to the market conditions: "We continue to see that the expectations of our clients are high and that the demand to scope of service rise, despite the more fierce competition in general.

"Some may feel that they have to shave their offering in order to maintain a competitive edge, others maintain or set to develop even higher standards and seek out the businesses where the service scope matters as much as price. SAL belongs to the latter pool."

The markets are constantly changing; fleets from rival sectors are competing for cargoes were revenues can still be earned, said SAL. The offshore sector has seen a number of vessels originally destined for oil and gas projects now venturing wind and renewables. The MPV/project carrier segment has seen a similar trend by the entrance of bulk carriers and other vessel types. When price and position are key attributes for working in spot markets, those with smaller fleets become exposed.

Yamazaki believes that SAL's strategy of mastering its complex niche will pay off in the long term, enabling it outperform the market. "With the challenged times in shipping, it is necessary to identify niches a shipping company successfully can operate in," he claimed. "I think that the fleets that remain focused to their core business and competences, and which man- age their costs well, will be able to navigate through 2016, what in my view will be a time of troubled waters."

Those core competencies were demonstrated across a number projects executed by SAL Heavy Lift during 2015. HLPFI reported in September 2015 that Lone shipped six units of heavy project cargo, weighing a total of 2,219 tonnes, for a refinery and petrochemical complex project in Vietnam.

Earlier in 2015, Svenja was chartered by Crowley for the installation of the development platform within the Kitchen Lights Unit #3 (KLU) - a petroleum exploitation area of Deutsche Oel & Gas, spanning 337 sq km, in the Cook Inlet off the coast of Alaska.

www.sal-heavylift.com