Maritime industry leaders Wednesday expressed “cautious optimism” for the Singapore maritime industry this year, calling for more focus on new technology and infrastructure and saying shipowners needed to prepare for a possible upturn in costs if oil prices bounced back.
Speaking two weeks ahead of the Sea Asia 2015 gathering, part of the Singapore Maritime Week, Keppel Offshore & Marine’s managing director Michael Chia said shipowners would need to look into research and development to “improve their cost structure” as low oil prices “cannot continue for the the long term” and shipowners needed “to prepare for the next upswing” which would affect their operating costs such as bunker fuel.
Chia, who is also chairman of the Singapore Maritime Foundation, said oil majors had already stated that benchmark crude prices should be around $80-85/b for “capital projects to continue,” making current prices of around $55-60/b unsustainable for oil majors.
“Low bunker prices have a positive impact on the shipping industry but our marine and engineering sectors are likely to face some headwinds in securing new orders,” he said at a press conference.
Gas is also a new space for the maritime industry and is “becoming more important in energy patterns” for shipowners, in terms of LNG bunkering, Chia added.
“LNG is a new space which will continue to play a bigger role in meeting energy demand. Here in Singapore, for example, we opened our first LNG terminal last year to help secure the country’s energy supply and establish ourselves as a hub for LNG bunkering,” he said.
RESEARCH AND DEVELOPMENT
“These projects need the right technology and infrastructure in place and the offshore industry is focusing its research and development efforts to support these trends,” he added.
It is important that Singapore is able to compete on the technology front, he also said.
The Maritime and Port Authority of Singapore is focused on developing the infrastructure in Singapore to accommodate wider berths for the ever-rising size of container vessels, and also focused on the manpower training segment to ensure there is enough manpower for the maritime industry’s requirements, said MPA assistant chief executive (development) Tan Beng Tee.
Managing director of Precious Shipping Khalid Hashim said: “Asia continues to be the driving force behind global growth but slower-than-expected economic development in some markets has had a significant impact.”
“The recent slow-down in China’s real-estate industry, for example, has reduced demand for iron ore at a time when there [are] more dry bulk ships in the global fleet,” he said.
In 2007-2008, there were so many ships on order lists that there was a “tsunami of ships” that were delivered in the 2009-2012 period.
During that period, total dry bulk capacity grew by 12%, he said.
“Iron ore makes up a significant portion of the cargo transported by dry bulk shippers and this softening demand, coupled with increased capacity, has resulted in a significant shift in the supply and demand balance within the global dry bulk shipping sector,” he added.
Hashim said the industry was taking action to manage these challenges and “companies are focusing on driving efficiencies and managing costs to weather these challenging conditions…One of the ways they are doing this is by scrapping or selling older assets (vessels), a move which also allows them to generate more cash.”
The ordering of new dry bulk ships has also “ground to a halt,” and, of the new ships ordered, some owners have asked for postponement of delivery dates or converted their orders from dry bulk vessels to tankers — which is good for the dry bulk sector, he said. In addition, some shipyards had gone bankrupt, meaning hundreds of ships on order would never be delivered to the market, stemming the problem of over-tonnage.
These are factors that might turn around the dry bulk sector from having a challenging year to a “not so bad” year, Hashim said.