Today's blog is courtesy of the gentle proddings with a not so sharp stick from an old friend. Thanks Mike!!
With the holiday season rapidly approaching, the impending disappearance of key people is having its usual unnerving effect. Can you get that contract signed in time, do you really have to mobilise the vessel on Christmas day, where will I get the charts from? All the usual small things that make owners lives miserable at this time of year, and even more so for the operations staff.
There is also the customary flurry of activity as people try to clear their desks before they fly off to home or the beach. The down side of all this activity packed into a short period of time, is the realisation that if your boat is not fixed in the next few days, there's a very real possibility that it will be in the same place until mid January. Not much fun for already beleaguered owners.
But enough Christmas cheer.
It seems that some large International owners must have been taking note of my favourite subject. Yes of course, scrapping. There have been various reports of 1970's tonnage beginning to head to the breakers, and others, of some even quite late built tonnage being laid up.
It was only a matter of time, especially as it has become almost impossible to finance these old vessels by what willing buyers there are out there.
This is a good start, but the trickle needs to turn into a torrent to really have an impact on the woeful day rates out there.
We don't have the advantage of the predictive abilities of the Mayan peoples here at the shophouse, or the long count calender (a reference to the movie 2012 in case you're not a disaster movie fan), but we do sense a certain optimism creeping in for Q3 onwards next year.
This could be real, or it could simply be the resilient souls of the oil patch taking an optimistic view, but whichever it is, it can't come soon enough.
Working on the basis that this is more than likely to be the last of our irregular postings for 2009, I'd like to take this opportunity to wish all 6 of our readers a very merry Christmas and a happy and prosperous New year.
I'll try harder next year.
Friday, December 11, 2009
Sunday, November 29, 2009
Where Does the Time Go?
So, the end of 2009 is rapidly approaching. Did the year deliver what we thought it would? I'm not sure, but I think it delivered everything that we feared it would.
It's a funny thing, time. Use it wisely and you have a success on your hands, but get it wrong and the consequences can be dire. Just look at the variations in assets prices across the last cycle.
If we look at the bigger picture, the global economy, there have been signs for some hope of a recovery. But then, just as we start to feel perhaps, a little Christmas cheer, we hear the news of Dubai and its' problems. The world went back into shock and markets across the world fell again. It seems that all the bad news is not yet in the public domain. How much more to come? How many more set backs?
Shipping, including the offshore sector, could still very well hold a major shock yet to come. The order books are still bulging, spreading through to 2012. The hope must have been that things would have recovered by the time all this steel delivered, but surely, now that looks increasingly unlikely, and the banks will have to take yet more overvalued assets onto their balance sheets. The numbers are not small either!!
Despite a sustained oil price of over $70, offshore activity still appears sluggish in many locations. It begs the questions what is going to be required to kick start the oil patch again, and when will it happen?
Day rates are depressed just about everywhere, some more than others, and still seem to be falling. The reasons for this appear to be different across the various sectors.
In the lower BHP/DWT range there are just too many boats, which is down to my favourite soap box subject, scrapping! It must be done or rates will just not recover to where they should.
For the higher end sectors it seems to be a very definite lack of demand, but this should correct itself when the activity levels increase again. Of course, when this will happen is the big question. The collective wisdom now seems to be hanging its' hopes on 2011. Which means that the beleaguered owners of these assets (and their banks) have another year to endure before the good times return.
And of course, the boats are still rolling out of the shipyards on a weekly basis, piling on more over supply.
It's no different for rigs either. There are a lot of rigs still to deliver, some purchased at eye watering prices, and a growing number of distressed assets.
All in all, it hasn't been a very rosy year, and the hoped for recovery still seems a distant dream. There is still an enormous amount of financial risk in the system, and where it will land is still uncertain. But it seems likely that the banks will take the lions share of the bad news. Of course, all of this bad news will no doubt provide a wealth of opportunities for those with access to debt and equity, and there are early signs of consolidations going on, and most of the distressed assets continue to be picked up by canny buyers.
We've seen the bad times before of course, but the last cycle was so good, and so sustained that I think many of us have forgotten what they were like, and then we have a whole generation of new people in the industry that have never seen it before. Reality bites!
The good thing is that we tend to be a resilient bunch, pragmatic, bordering on the cynical, and we'll keep our spirits up and plough through it.
Let's hope that things improve soon, and then maybe I'll get to write my infrequent blogs with a happier note.
It's a funny thing, time. Use it wisely and you have a success on your hands, but get it wrong and the consequences can be dire. Just look at the variations in assets prices across the last cycle.
If we look at the bigger picture, the global economy, there have been signs for some hope of a recovery. But then, just as we start to feel perhaps, a little Christmas cheer, we hear the news of Dubai and its' problems. The world went back into shock and markets across the world fell again. It seems that all the bad news is not yet in the public domain. How much more to come? How many more set backs?
Shipping, including the offshore sector, could still very well hold a major shock yet to come. The order books are still bulging, spreading through to 2012. The hope must have been that things would have recovered by the time all this steel delivered, but surely, now that looks increasingly unlikely, and the banks will have to take yet more overvalued assets onto their balance sheets. The numbers are not small either!!
Despite a sustained oil price of over $70, offshore activity still appears sluggish in many locations. It begs the questions what is going to be required to kick start the oil patch again, and when will it happen?
Day rates are depressed just about everywhere, some more than others, and still seem to be falling. The reasons for this appear to be different across the various sectors.
In the lower BHP/DWT range there are just too many boats, which is down to my favourite soap box subject, scrapping! It must be done or rates will just not recover to where they should.
For the higher end sectors it seems to be a very definite lack of demand, but this should correct itself when the activity levels increase again. Of course, when this will happen is the big question. The collective wisdom now seems to be hanging its' hopes on 2011. Which means that the beleaguered owners of these assets (and their banks) have another year to endure before the good times return.
And of course, the boats are still rolling out of the shipyards on a weekly basis, piling on more over supply.
It's no different for rigs either. There are a lot of rigs still to deliver, some purchased at eye watering prices, and a growing number of distressed assets.
All in all, it hasn't been a very rosy year, and the hoped for recovery still seems a distant dream. There is still an enormous amount of financial risk in the system, and where it will land is still uncertain. But it seems likely that the banks will take the lions share of the bad news. Of course, all of this bad news will no doubt provide a wealth of opportunities for those with access to debt and equity, and there are early signs of consolidations going on, and most of the distressed assets continue to be picked up by canny buyers.
We've seen the bad times before of course, but the last cycle was so good, and so sustained that I think many of us have forgotten what they were like, and then we have a whole generation of new people in the industry that have never seen it before. Reality bites!
The good thing is that we tend to be a resilient bunch, pragmatic, bordering on the cynical, and we'll keep our spirits up and plough through it.
Let's hope that things improve soon, and then maybe I'll get to write my infrequent blogs with a happier note.
Tuesday, September 15, 2009
Hhmm
Tricky things these blogs. After weeks of not committing anything to the screen I finally sit down to emit some wisdom. After 2 hours of struggling with my almost non existent creative side I finally had something down.
This is where the trouble started. I changed screens to review.... Only I couldn't as it had disappeared. The help menu assured me that I could retrieve my lost work of literary genius by pressing a certain button (which was not on my screen), however, nothing worked and I had to face up to the disheartening fact that all of my toil had been in vain.
So, sorry dear reader (I don't think that we're popular enough for a plural yet) but you will never get to see that particular outpouring of wisdom.
I am only now regaining the will to write again, and as I near the end of this short blog I fear what will happen when I try to post it.
If it works, I may be back with more.
Until then.
This is where the trouble started. I changed screens to review.... Only I couldn't as it had disappeared. The help menu assured me that I could retrieve my lost work of literary genius by pressing a certain button (which was not on my screen), however, nothing worked and I had to face up to the disheartening fact that all of my toil had been in vain.
So, sorry dear reader (I don't think that we're popular enough for a plural yet) but you will never get to see that particular outpouring of wisdom.
I am only now regaining the will to write again, and as I near the end of this short blog I fear what will happen when I try to post it.
If it works, I may be back with more.
Until then.
Friday, May 8, 2009
When will the scrapping begin?
We are all familiar with the beaches of Alang and elsewhere. We've dodged the monsoons and towed the slightly sad hulls of the tankers and bulkers to their last port of call. But then we've always retrieved our gear and moved on to the next job.
Now, maybe, it's time to consider the unthinkable, time to start scrapping our own vessels!
There has never been much of an incentive in the past. Not much steel, difficult to dismantle and machinery usually so tired that it was approaching its' last wheezing breath, and anyway, we could probably sell it to some remote part of the world to trade for a few more years yet. Somewhere exempt from the beady eye of class and flag. And in any case, there were no new builds to replace the tonnage.
But what now? We have never had so many new builds waiting to join the charter market in such a short space of time. We have never had such a bountiful supply of elderly ladies. Scrap prices have past their glorious zenith (at least for now), and you have to have the cash pile of a drug baron to buy vessels since the banks picked up their towels and went to the beach, so buyers for future trading are more elusive than the Unicorn.
We all know that given the current depressed market, and with deliveries arriving on a daily basis, we need to take some tonnage out of the picture, but who will flinch first? No doubt our learned colleagues in the finance departments will determine how much downtime we can have before it's a one trip to the breakers.
I suspect that from the charterers perspective, these older vessels still have a part to play in the rates game. They can be relied upon to drive rates down further and faster than if just the newer boats were available. So perhaps one or two will continue to be fixed, allowing some project to meet its' reduced budget. Next time of course, maybe the new boats will be bid at the same level. Job done!!
Even if we start to scrap it won't help everybody. The deepwater operators will still have to joggle with all the other shiny news toys in their particular playground, waiting for better times to come. The price you have to pay for being at the frontier of offshore development I suppose, but then, when times are good, they are very good indeed.
Now, maybe, it's time to consider the unthinkable, time to start scrapping our own vessels!
There has never been much of an incentive in the past. Not much steel, difficult to dismantle and machinery usually so tired that it was approaching its' last wheezing breath, and anyway, we could probably sell it to some remote part of the world to trade for a few more years yet. Somewhere exempt from the beady eye of class and flag. And in any case, there were no new builds to replace the tonnage.
But what now? We have never had so many new builds waiting to join the charter market in such a short space of time. We have never had such a bountiful supply of elderly ladies. Scrap prices have past their glorious zenith (at least for now), and you have to have the cash pile of a drug baron to buy vessels since the banks picked up their towels and went to the beach, so buyers for future trading are more elusive than the Unicorn.
We all know that given the current depressed market, and with deliveries arriving on a daily basis, we need to take some tonnage out of the picture, but who will flinch first? No doubt our learned colleagues in the finance departments will determine how much downtime we can have before it's a one trip to the breakers.
I suspect that from the charterers perspective, these older vessels still have a part to play in the rates game. They can be relied upon to drive rates down further and faster than if just the newer boats were available. So perhaps one or two will continue to be fixed, allowing some project to meet its' reduced budget. Next time of course, maybe the new boats will be bid at the same level. Job done!!
Even if we start to scrap it won't help everybody. The deepwater operators will still have to joggle with all the other shiny news toys in their particular playground, waiting for better times to come. The price you have to pay for being at the frontier of offshore development I suppose, but then, when times are good, they are very good indeed.
If you consider the total fleet numbers and age profiles, some categories of vessels may even be in short supply if we scrap vessels over 25-30 years old. A shortage of vessels would cheer the owners up no end, but then the charterers would be unhappy.
You just can't please everybody I guess.
Tuesday, April 21, 2009
Friday, April 3, 2009
So, not much musing been going on at the Shophouse Desk lately. Technology conspired against us and refused us access, apparently Google viewed our usage pattern as similar to a virus and wouldn't let us in. Too much online shopping I ask?
The annual cultural event that is the Hong Kong Rugby 7's also had an impact, and kept us away from our desk. It was good to see many of our offshore colleagues at the stadium enjoying a Pimms and a good ruck. We hope that they've all recovered now.
The World seems to have kept turning, and dare I say it, but there even seems to be some confidence returning. Shares have rallied, and held onto the gains, oil is now hovering around the $50 per barrel rather than $40, and Newcastle United are pinning their hopes on Alan Shearer saving them from relegation ( I wouldn't hold your breath on that last one!!).
The latest hot topic seems to be just how much oil will we need going forward. Were all those estimates of demand outstripping supply by up to 4% so wrong? Will we need to drill so many holes in the ground or not? I realise that the new Tata Nano is an incredibly miserly vehicle when it comes to fuel, but once every Indian household has one (and the Chinese the equivalent??) then will we ever be able to drill enough holes to keep up?
Whilst the commercial people (and the accountants) are having to get used to down time again, the technical people are now happy that they can get their urgent jobs done between charters at last, and supplies of string and chewing gum for emergency running repairs have dropped off dramatically. Proof that one persons "Cloud" is anothers' " silver lining".
The annual cultural event that is the Hong Kong Rugby 7's also had an impact, and kept us away from our desk. It was good to see many of our offshore colleagues at the stadium enjoying a Pimms and a good ruck. We hope that they've all recovered now.
The World seems to have kept turning, and dare I say it, but there even seems to be some confidence returning. Shares have rallied, and held onto the gains, oil is now hovering around the $50 per barrel rather than $40, and Newcastle United are pinning their hopes on Alan Shearer saving them from relegation ( I wouldn't hold your breath on that last one!!).
The latest hot topic seems to be just how much oil will we need going forward. Were all those estimates of demand outstripping supply by up to 4% so wrong? Will we need to drill so many holes in the ground or not? I realise that the new Tata Nano is an incredibly miserly vehicle when it comes to fuel, but once every Indian household has one (and the Chinese the equivalent??) then will we ever be able to drill enough holes to keep up?
Whilst the commercial people (and the accountants) are having to get used to down time again, the technical people are now happy that they can get their urgent jobs done between charters at last, and supplies of string and chewing gum for emergency running repairs have dropped off dramatically. Proof that one persons "Cloud" is anothers' " silver lining".
Friday, March 13, 2009
It's Friday again. It's raining. Again. That would seem to provide evidence of the existance of the rainy season then. It also means that Ayus' family BBQ may have to be held under canvas.
I've been watching the price of oil this week as it made a brave attempt to lurch towards the $50 a barrel mark before falling back. What has struck me is how little effect events outside of the financial world now have upon it.
A few short months ago, political unrest, a pipeline explosion or a sudden cold snap would have the price of oil going into an almost vertical trajectory. Now it seems that those who make the markets no longer consider these events important. One wonders if they will maintain this stance once the recession is over. Doubtful I think.
The oil patch seems to be jogging along, and appears to have adapted to our new reality both well, and quickly. The initial confusion amongst the players shows signs of clearing, and a realisation that a path towards suicidal day rates may not have to be beaten. Dare I say it, but some could be thought to be bullish on even the short term prospects.
News this week of more vessel cancellations. Excessive delays being reported as the culprits. One has to wonder how many more will follow! Whilst events such as these could provide relief to some beleagured owners and their banks, the bad news has to end up in somebodies lap. In this case probably the yards and their banks. (These banks get everywhere don't they). Could this be where the first serious signs of stress begin? How many undelivered new builds can the yards absorb before problems arise? How many of these orphans can find new homes at such short notice when the banks (there they are again) aren't able to lend? Could shipyards be the next group to go to governments asking for assistance? Well, if it's good enough for GM, Ford et al, why not? The fundamentals are the same, employers of large numbers of people, extended clusters of suppliers, mostly export driven. Only the fragmentation of the players, and hence the inability to make a unified approach differentiates them from the auto industry.
My thanks go to Stephen Carson for the following images.
The first vessel is the GlomarIII circa 1968, the other being the new build Dhirubhai Deepwater KG1. No prizes for spotting the difference!! But, if ever there was a need for justification for increased day rates then surely these two pictures illustrate it as well as any.
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