IHS Markit – market prospects Platform Supply Vessels

Published in category: Offshore Oil & Gas

From an interview with Alan Pirie, Senior Marine Specialist at leading industry analyst IHS Markit, on what the future holds for the PSV sector.

No let-up in oversupply

The current situation is that there are plenty of PSVs still on shipyards’ order books, despite the fact that next to no new orders have been placed in recent months. According to IHS Markit’s Marinebase, there are 170 PSVs on order or in build. A significant number of these are in the Far East, and so this region in particular will see plenty of new tonnage entering the market over the next couple of years. This will only add to the oversupply currently seen in the worldwide PSV/OSV market.

Day rates to remain soft

It is unlikely that there will be an increase in average day rates in 2017, despite slightly increasing demand. The main reason for this being the current oversupply of tonnage in the market, and the fact that there are around 300 PSVs and AHTS vessels in the global order book, plus over 900 OSVs currently laid up around the world.

Offshore vessels on anchorage

Video made by: Jan van der Vorm

Day rate improvements would be dependent on a significant and sustained surge in demand, although even if this was to take place it would take some time for the supply/demand balance to move in favour of vessel owners as opposed to chartering companies. Any increase in demand would potentially see vessels coming out of layup, causing more competition for term fixtures between owners, and so putting downward pressure on day rates once again. For this reason it is expected that a recovery in day rates cannot be expected anytime soon.

Large PSVs likely to recover first

According to IHS Markit’s Global Supply Vessel Forecast (GSVF), the sector with the best visible future demand is the large PSV (4,000 deadweight+) sector. Large PSVs with ample deck space and large storage capacity are sought after by chartering companies due to their ability to work in deep water and harsh environments. Vessel owners know this, however, and have ordered a large number of vessels in this class over the last few years. Therefore utilisation in this sector may still be low despite large demand, due to the large number of this size and type of vessel currently being built. Few very large AHTS vessels are currently on order, so there will be smaller growth demand in this sector but perhaps a better rebound. Large scale scrapping/selling out of the AHTS market by companies like Maersk Supply Service is also having a positive impact on this market.

Global Supply Vessel Forecast

Aquaculture and Walk-to-Work vessels look promising

The Walk-to-Work sector is one area worth watching, and we have seen some charters agreed, although not in great numbers. Aquaculture is another growth area, and some Norwegian OSV companies have also been able to utilise their PSVs in the fish farming sector by modifying them so that they can be used for salmon delousing work. Somewhat morbidly, many vessels have also been hired to help support efforts relating to the Mediterranean refugee crisis, in which increasing numbers of desperate people are attempting to leave war torn countries such as Libya and Syria to reach Europe. In the process, many are taking life-threatening risks to cross dangerous seas in order to achieve a better life. Some OSVs have used their rescue capabilities to save the lives of stricken men, women and children.

Further operator consolidation likely

We have already seen some consolidation in the PSV sector. In Europe, Solstad took over Rem Offshore, before the merger of Solstad, Farstad and Deep Sea Supply took place. This has resulted in one of the biggest OSV companies in the world being created, and its strength in numbers may help the company gain some more negotiating power with charterers. How successful this merger will be remains to be seen, but it is fair to say that many senior players within the industry had been calling for more mergers and consolidation in the OSV sector for some time prior to this deal going through. We have seen several other Norwegian players going through financial restructuring in a bid to remain afloat during the current downturn, and it is not impossible that further consolidation will be seen this year.