Upstream Marine Industry Risk

No matter what side of the contractual fence you occupy, the risk is stacking up. Sure, as a charterer there has arguably never been a lower cost point at which to contract stunningly attractive and capable tonnage but is that really a good thing?

I'm no graphic artist so you'll have to forgive the quality of the above image. It is my attempt to capture the situation graphically. All the way up to the commodity price crash of mid 2014, shipyards were churning out vessels like there was no tomorrow. You couldn't get machinery sets, thrusters or cranes for example for love nor money. Speaking of which, money was easy to come by, too easy, way too easy and the supply feed just kept growing and growing. Even if the oil price hadn't tumbled it is doubtful if supply was going to make an exciting market place for anyone other than a charterer. Supply was headed to a point far in excess of demand almost across all vessel types.

Ruthless rate cutting by clients then hit hard as overall demand fell for vessels and still vessels were being delivered from the yards. History we know but worth repeating so that perhaps later generations don't act so foolishly.

Sitting as we are now in Q3 2017 we're seeing vessels traded at below break even point even for some vessels and companies that have taken the proverbial haircut / hit on valuation / impairment. I'm sure that will agree with me when I state that this is most definitely not sustainable nor is it in anyone's interest.

We are once again at a decision point; sit back, do nothing and almost certainly watch cost (and risk) increase for a whole variety of reasons (1); take action now to ramp up charter and service rates to levels that enable owners and service providers to cover costs plus a little bit (2) or keep squeezing rates and delay the inevitable rise but in doing so ramp up the risk level purely due to extending its length.

Here at Oceanum Edge we're strong advocates of managing such situations.

'Making Business Better' is what we're all about

Whether charterer or contractor get in touch with us via [email protected] to discuss what we can do to assist you.