02/04/2019

The Norwegian Shipowners’ Association Outlook Report 2019: Faith in the future despite tough markets

Despite highly challenging markets in recent years, both the transport segments and the offshore segments expect better profitability in 2019.

Norwegian shipping companies in foreign trade report a total turnover of NOK 229 billion in 2018, an increase of 11 per cent from the previous year. International deep sea shipping companies in particular showed strong growth in 2018, driven by an increase in freight rates in the second half of the year. 60 per cent of shipowners expect increased revenue in 2019, while 20 per cent expect reduced revenue, and 20 per cent unchanged.

Deep sea shipping companies are once again the largest group in the Norwegian foreign-going fleet. Revenue increased notably in 2018 and is expected to total NOK 120 billion in 2019.

Shipping is global

The results of the member survey show that Norwegian shipping companies' revenue from markets outside Norway made up 61 per cent of total turnover in 2018, or NOK 139 billion.

For short sea shipping, Germany is still the largest market, followed by the UK. For deep sea shipowners, the USA and China are most important markets. Norway and the UK are most important for offshore and rig companies.

Continued demanding offshore markets

The offshore segments anticipate continued challenging markets with a high number of ships in layup, prolonged low rates, and relatively short horizons on contracts.

Several years of major cost reductions and efficiency improvements, combined with extensive consolidation in the supplier industry, have significantly increased profitability on the Norwegian shelf. The combination of large cost reductions and a more stable oil price, which is considerably higher than at the lowest levels, has led to very good margins for the oil companies.

"When activity levels pick up and the markets tighten on the capacity side, the oil companies must also expect a significant increase in the rates for ship operations," says Harald Solberg, CEO of the Norwegian Shipowners' Association.

Fewer ships in layup

The number of ships in layup peaked during the winter of 2017. As of February 2019, 112 offshore vessels and 20 rigs were in layup, compared to 137 ships and 25 rigs in February 2018. Norwegian Shipowners' Association members report that the figure will fall to 78 ships and 15 rigs by the end of this year. This reduction in the number of ships and rigs in layup is due to a combination of increased activity on the Norwegian Continental Shelf and sale of ships.

Preparing for the future

In this year's member survey, half the shipping companies state that they will renew the fleet through newbuilding over the next five years. Shipowners estimate that they will contract a total of 137 ships and five rigs during that period. Most of the orders are expected to come in the transport segments, deep sea and short sea shipping. More than 40 per cent of shipping companies, primarily short sea shipowners, consider Norwegian shipyards as relevant for the construction of new vessels.

"The short sea sector is poised for extensive fleet renewal. This is a tremendous opportunity to develop and implement new technology that will give us a more environmentally friendly and competitive short sea shipping fleet, at the same time as we develop technology for export to larger markets,” says Solberg.

New ocean industries – a new era for Norwegian industry

Norwegian shipowners, offshore enterprises and supplier companies are well positioned to take a larger role in the renewables market, including offshore wind. Three out of ten shipping companies have activity in the offshore wind market today.

27 per cent of shipping companies state that they consider the offshore wind market to be interesting for their business over the next five years. Among offshore service companies, 55 per cent state that they are considering activity in the offshore wind market over the next five years.

18 per cent of shipping companies report that they consider the aquaculture industry to be of interest in the next five years, while 14 per cent say the same about subsea mining.