2019 Maritime Outlook Report
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Foreword 6 Summary 8 An ocean of opportunities 11 Maritime industry and value creation 14 Maritime outlook 2019 21 4
The Norwegian Shipowners’ Association: In our view 30 1 Shipowners need stability to operate from Norway 31 2 Ambitious emmision targets 34 3 The seaway is the green way 36 4 A competitive and attractive Norwegian Continental Shelf 38 5 Ocean industries – a new era for Norwegian industry 40 6 The maritime industry has a broad need for competence 42 7 World-leading maritime research and innovation 44 8 Global industry - global regulations 46 9 Europe – our most important market 48 10 Great potential in the High North 49 11 Maritime security and crisis response 50 12 Cleaner oceans 53 Data basis and methodology 54 5
Foreword If we were to open this year’s Maritime Outlook constitute vital markets for Norwegian shipping. Report with a word cloud, the words would represent Unrest threatening the basic pillars of commerce conflicting developments. On the one hand, the world in Europe is of major concern, and Brexit can around us is characterised by uncertainty, turmoil, potentially have significant negative consequences conflicts, and challenging times in most commercial in both the short and the long term. markets. On the other hand, we see the arrows pointing in the right direction in the most fundamental areas We live in a world in great need of more cooperation, of society. Projected life expectancy in the world is more trust and more optimism, in order to overcome increasing, fewer people live in extreme poverty, more the challenges we face as a global community. In are receiving education, child mortality is declining – reality, we are experiencing movement in the opposite and the list goes on. direction, and the overall picture is one of a world heading for de-globalisation. The Norwegian foreign-going fleet makes about 80,000 port calls around the world every year. This gives us a Trade presence all over the world, around the clock. Shipping Shipping has been crucial to establishing global value is therefore confronted with all the challenges that the chains for retail trade. This trade has provided oppor- world has to offer, earlier and with more force than tunities for countries around the world to produce most other industries. We are now witnessing: goods that they have been able to exchange on the world market, lifting millions of people out of poverty. ■■ A challenging and fragmented security policy picture in which decades of disarmament seem in Political awareness surrounding the opportunities danger of being displaced by a renewed weapons found in the ocean is on the rise. The oceans are buildup. This development is exaggerated by important for the Norwegian economy, and will the emergence of new arenas for conflict, be a central source of value creation and jobs for characterised in particular by the struggle for Norway well into the future. A rapidly growing world control of digital domains. In addition to security population needs new jobs, sufficient and proper food, challenges, there are a number of ongoing armed medicines, and a clean environment. The precondition regional conflicts. for meeting these needs is the continuation of robust ■■ An unresolved trade conflict between the US and and orderly conditions for world trade. If the basic China, which in itself creates uncertainty and framework conditions for trade are weakened, oppor- hinders growth in the world economy. Effects of tunities to sustain the growth and development of the the trade conflict are magnified by protectionist last decades will also be greatly reduced. trends and an escalating technology conflict, particularly between the West and China. We will continue our efforts to generate development ■■ Uncertainty related to the UK’s withdrawal and opportunities despite the demanding landscape in from the EU. Both the EU countries and the UK which we operate. 6
Climate The short sea fleet is in serious need of renewal due Shipping is the most energy efficient means of tran to the relatively high average age of the fleet. This sporting goods, but it nevertheless constitutes a major window can and should be exploited to test zero and source of greenhouse gas emissions. We believe those low emission technologies that can be scaled to larger who are best and fastest at finding solutions for low ships where climate solutions are lacking today. and zero emission transport will be the winners of the future. The Norwegian maritime industry is uniquely By using the Norwegian coast and the short sea fleet positioned to meet this challenge. to test and develop new and scalable technology, the Norwegian cluster can make important contributions to We need ambitious global regulations. A look back reducing global greenhouse gas emissions, in and out- at major milestones shows that once the IMO and side Norway. The technology is in the process of being the world community have made up their minds, the passed on from ferries in coastal traffic and offshore industry has mobilised to get on board with common vessels, to ships in regional short sea trade, and further regulations. New regulations also represent new oppor- on to transcontinental shipping across the major oceans. tunities for the maritime industry to develop innovative low-emission technology. The IMO’s ambitions send a This year’s report clear and emphatic signal to the market: investments in In this edition of the Maritime Outlook Report, we low-emission technology will pay off. A broad approach have described developments that characterise our is needed, based on technological innovation, new and industry today, and related our members’ expectations more energy-efficient designs, operational improve- for the coming year. We have also examined closely ments, alternative fuels, and hybrid solutions. Norway is which political measures should be taken to ensure leading the way in this work: that the Norwegian maritime industry remains com- petitive in the years to come. We hope the report will ■■ In the offshore industry, we already have extensive be useful for those seeking an updated picture of the experience with diesel-electric power and LNG as market situation in an industry that we believe to be fuel for ships. Norway’s most exposed to international competition. ■■ The first fully electric ferry, the Ampere, was developed by the Norwegian maritime cluster and Wishing you enlightening reading, put into operation in 2015. By 2022 we will have 60 battery-powered ferries along the Norwegian coast. ■■ Yara and Kongsberg are building the world’s first emission-free autonomous ship. ■■ The first hydrogen-powered ferry is under Harald Solberg construction. CEO, Norwegian Shipowners’ Association 7
Summary In our 2019 member survey, we see the change in out- 2019 compared to 2018. By comparison, half of the look identified last year being followed up by cautious shipowners expected weaker profitability in 2017. One optimism. Since the financial crisis hit the industry in in five shipowners expect weaker profitability in 2019 2008, the transport segments have gradually increased compared with 2018. One year ago, one out of four their turnover, which is now substantially higher than shipowners had the same outlook. before the financial crisis. The offshore segments, facing very demanding times since the price of oil fell The biggest change in anticipated results is found in 2014, and seeing their turnover halved from 2014 among offshore shipping companies. For these to 2017, have experienced a slight increase in turnover companies, the proportion anticipating increased over the past two years. Turnover in these segments profitability has risen from 35 per cent in 2018 to has now stabilised at a low and unsustainable level. 47 per cent in 2019. The proportion expecting weaker profitability has decreased from 32 per cent to 25 per Shipowners’ total turnover increased by 11 per cent, cent. However, an improvement in operating profit from NOK 206 billion in 2017 to NOK 229 billion in does not imply that these shipowners have achieved 2018. It appears that 2019 will be a year with continued sustainable profitability. Low rates and limited activity marginal growth. All segments expect increased mean that offshore shipping companies are still facing revenue in 2019. If this prediction proves accurate, demanding times. shipowners’ total revenues will end at about NOK 240 billion in 2019, up almost five per cent from last year. Last year’s Maritime Outlook Report brought the news that peak layup had been reached. In February 2017, Norwegian shipping companies’ revenues from markets 183 vessels and rigs were in layup. The corresponding outside Norway accounted for about 61 per cent of figure for February 2018 was 162. As of February total turnover, or NOK 139 billion in 2018. Deep sea 2019, there are 112 vessels and 20 rigs in layup. This is shipping companies in particular have the largest share a reduction of 25 ships and five rigs. of their revenue from foreign markets, 90 per cent in 2018, corresponding to NOK 102 billion. By comparison, Layup forecasts for 2019 indicate that the number Norwegian shipping companies had NOK 117 billion in of ships and rigs in layup is expected to fall to 93, a operating revenues from petroleum-related activities, reduction of 34 ships and five rigs. Of these, offshore representing 51 per cent of total turnover. shipping companies control 33 vessels and deep sea shipowners one ship. This reduction in the number Over the past two years, shipowners have adopted of ships and rigs in layup is due to a combination of a more positive outlook regarding profitability. More increased activity, ship recycling, and sale of vessels. than half now expect operating profits to improve in 8
2018 was the first year since the oil price collapse of expectations for employment growth. The offshore 2014 where shipowners as a whole increased their shipping companies follow, with short sea shipping employment. Shipowners added a total of 1,550 companies expecting a slight increase in the number of employees in 2018. 1,369 employees were placed on new employees. leave or terminated, while 2,919 were hired in the same period. 40 per cent of these new hires were As a result of proactive maritime policies in recent with offshore drilling companies. The proportion of years, such as the relaxing of trade area limitations employees placed on leave in shipping companies and expansion of the tax refund scheme for seafarers, increased from 22 per cent in 2017 to 34 per cent 96 vessels have flagged in to the Norwegian register in 2018, which may indicate that the companies over the past three years. In our member survey, to a greater extent believe there will be a need to 24 shipowners state that they are considering flagging reactivate these employees. ships in to NOR or NIS. The total potential is 78 vessels, divided among 44 deep sea vessels, All segments expect an increase in employment in 22 offshore vessels and twelve short sea vessels. 2019. Overall, companies anticipate hiring almost This is significant, as having a large number of vessels 2,500 new employees, with around 300 being under the Norwegian flag is important for Norway’s terminated or placed on leave. Deep sea shipowners impact in international forums. and offshore drilling companies have the highest 9
An ocean of opportunities Our current prosperity and our modern society are energy and better access to nutritious food. The built around the opportunities that the oceans have demand for natural resources will increase, as will provided. For millennia, the sea - the main artery trade across borders and between continents. We of globalization - has linked people together across must use the oceans to address these challenges in a continents. The ocean has yielded food and energy sustainable manner. We are dependent on maritime for an ever-growing population, and trade between transport routes to efficiently shift the transport of countries and continents has laid the foundation for people and goods from the road to the sea. We need social development, economic growth and reduced the power from wind, water and waves to produce poverty. renewable energy. We must responsibly harvest the bounty and the boundless resources of the sea. From all walks of life and on all continents, the focus is now on the sea. From politicians, environmentalists Business is at its best when competitive advantages and citizens. From researchers and engineers, and commercial ambitions are used to develop entrepreneurs and business leaders. The oceans profitable and effective responses to society’s needs are sending a warning of a world in imbalance. Ice and challenges. The global community is on the is melting and the sea level is rising. Fish are full of threshold of a period with the potential for significant plastic and coral reefs are dying. Tsunamis, storm and necessary maritime growth. When a new chapter winds and floods are battering some of the world’s in our maritime history is written, it will be about most populous coastal regions. These are no longer renewal, innovation and progressive solutions for discrete indicators, but shrill warnings that life on global growth and value creation. earth is vulnerable and perishable. The Norwegian maritime industry must lead the way, But the oceans do more than warn of danger. The raise the standard and move the boundaries. We must sea also offers new opportunities. We live in a world seek beyond the horizon and below the surface of the where more and more people need shelter, food on sea to help solve the greatest global challenges of our the table, a good education, and a livelihood that time. Working together, we can lay the foundation of a can provide stability and security. This requires more new era for Norway as a maritime nation. 11
Norwegian shipping companies have assumed global Over the next few years, we will see autonomous leadership in the development of green technology solutions progress from pilot projects to commercial, for a future-oriented and sustainable maritime scheduled operations along the coast. Digital control industry. The movement was launched when the systems will help ships manoeuvre with increased industry gathered in 2008 to forge an ambitious and safety, efficiency and flexibility. We will see internet- binding commitment to removing harmful emissions based logistics systems revolutionize international from Norwegian shipping. Ideas, project sketches, trade and freight transport in the same way as similar technology and prototypes are flourishing all along solutions have modernized leisure travel. Not least, the coast. Norway already has one of the world’s we will witness developments that none of us can largest LNG-powered fleets, and we are leading the foresee today. charge to battery ferries and hybrid ships. Hydrogen is now being introduced as a fuel, and innovations and We are in the first stages of a formidable technological improvements are being continuously introduced to shift. Scientific breakthroughs in big data, autonomy reduce the industry’s climate emissions. The vision and artificial intelligence have broken ground for the was never expressed with lofty words in advertising evolution of new business models. In many areas, campaigns. Rather it triggered the desire to realize technology will provide improved precision and broader important achievements. This has resulted in a scope, higher efficiency, lower costs, and better quality significant commitment to knowledge development in business models and commercial products. It will and innovation across the value chain - new also provide the power to bring about more fundamen- technology and new energy sources, better choice of tal changes, and open doors to new opportunities that materials, and new solutions for logistics and design. were previously out of reach. The Norwegian maritime industry must seize this opportunity. We need shipping The maritime industry is now ready to take the next companies with the highest technological expertise to steps towards a high-tech, emission-free future. achieve our maritime goals. Seafarers should not only Norway has world-leading research institutions command the highest level of maritime expertise in the dedicated to the development of maritime technology. world, but also be equipped with the digital expertise We have industrial technology companies that develop needed to solve future tasks and take advantage of and commercialize products the world has never seen. future opportunities. And we have the world’s most complete and advanced commercial maritime environment. The future of We have already built a solid foundation. Norway has shipping will be defined in the interplay between these the world’s most complete maritime cluster. We have environments. the world’s strongest knowledge, experience, tech- nology and capital base. We have a community where 12
companies and institutions convene, where operators To deliver profitability for our owners, attractive and innovators meet to solve problems together. Ideas workplaces for our employees, and the quality meet investors, practical experience meets academic services demanded by our customers. insight, suppliers meet customers and decision makers meet doers. We challenge each other, we compete, To deliver value creation and added value to the and we cooperate. This is an absolute prerequisite global community. for the renewal and the transformation of Norwegian business. To be a leading, driving force in the international maritime industry. Let there be no doubt - we are Not least, we have high expectations for ourselves. commited to shaping a sustainable maritime future. The Norwegian maritime industry is robust and competitive. Turbulent markets, unpredictable conditions and demanding restructuring are part of our daily lives, but we greet the future with high and optimistic ambitions: 13
The maritime industry – one of Norway’s most important industries Norway is one of only a few countries with a complete maritime cluster, consisting of leading international shipping companies, seafarers, shipyards, equipment manufacturers, classification societies, ship designers, brokers, providers of insurance and financial services, and strong environments for research and development. The total maritime industry employed around 85,000 people in 2018 and contributed a value creation of NOK 142 billion. From the peak year 2014 to 2017, value creation was reduced by almost 30 per cent. In 2018, there has again been a growth in the industry, and further growth is estimated at around six per cent in 2019. Maritime opportunities Seafarers Norwegian maritime businesses have been technologi cally leading for many years. Among other things, they are central to the highly advanced technology development that takes place in the oil and gas Maritime Equipment SHIPOWNERS providers industry. Specialised vessels, positioning systems and services Cluster and control systems are just some examples of knowledge innovation drivers areas where Norwegian companies command a leading position. Norwegian shipping companies use technology and expertise from the offshore industry to establish themselves in new markets, especially in offshore wind. R&D This shows that there is a potential for a large degree of Yards environments technology transfer between the segments. Shipping is increasingly integrated into a complex Employment in the maritime industry has had virtually international network of logistics, requiring sophisticated zero growth in 2018. A slight increase is expected databases, surveillance systems and means of here in 2019. Around 40 per cent of the employees communication. Increasingly stringent requirements in the industry work within the shipping segment. on1safety and the environment are also stimulating spalte-mal 1 spalte-mal 30 per cent work in the service industry, and 20 per continuous innovation and technological development cent work in the equipment industry. in ship design, propulsion systems and ballast water treatment technologies, among other areas. Value creation in the maritime industry Employment in the maritime industry Value creation in2010-2018 - byindustry the maritime main groups 2010-2018 EmploymentNorway in 2010-2018 in the maritime - by main industry groups in Norway - by main groups 2010-2018 - by main groups 200 120,000 70 % Verft Verft 180 100,000 60 % 160 Utstyr Utsty 140 50 % People employed 80,000 Andel rederier Tjenester Tjene 120 Bill. NOK 40 % 100 60,000 Rederi Rede 30 % 80 40,000 60 20 % 40 20,000 10 % 20 0 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017Diesel 2018 Tungolje Batteri H (HFO) Shipowners Service Equipment Yards Shipowners Service Equipment Yards Short sea Deep sea 14 120 000 Verft
sjoner 18 The Norwegian fleet still ranks as number five in the world of shipowning nations Verft Utstyr The value of the world fleet is for 2018 calculated to USD 851 billion. This is an increase of about eleven per cent from the year before. Tjenester Norway ranks as number five. Japan, Greece and China are the three largest nations by far and the USA is in Rederi fourth place, just a margin ahead of Norway in the list. Estimates for 2019 show an increase in the value of the world fleet in total by ten per cent, this also applies to the Norwegian fleet. The offshore segment has the highest value in the Norwegian fleet. Only the USA has an offshore fleet with a higher value than Norway. If we isolate the Norwegian cargo carrying segments, the fleet value has increased with 21 per cent from 2017 to 2018. The estimates for 2019 show a further growth of 13 per cent. This indicates that the position of cargo carrying segments is strengthened. 6 2017 2018 When assessing the international standing of a shipping nation, carrying capacity is the most common standard of measure. But carrying capacity alone cannot provide a representative picture of the shipping industry’s international position and value creation. Verft There are several reasons for this, the most significant being that the size of a ship’s cargo conveys only limited information on its makeup and value. The Norwegian fleet counts a large number of advanced and high-value vessels not necessarily designed to maximise carrying capacity, but rather to perform complex operations. 2 spalte-mal Top ten merchant fleets of the world by market value as of 2018 sjoner Top ten merchant fleets of the world by market value as of 2018 18 100,000 Oljeprodukt 90,000 80,000 Verft Container 70,000 Utstyr Tørrbulk 60,000 Bill. USD Tjenester 50,000 Ro-Ro cargo 40,000 Rederi Råolje 30,000 20,000 Kjemikalie 10,000 Gass (LNG og LPG) 0 6 2017 2018 Japan Greece China USA Norway UK Germany Singapore South Korea Hong Kong General cargo Verft Offshore Other segments Chemical Dry bulk Container Andre segmenter Gas (LNG and LPG) General cargo Ro-ro cargo Crude oil Oil products 2 Offshore spalte-mal Development in the Norwegian fleet market value by segment Development in the Norwegian fleet market value by segment 70,000 Oljeprodukt 60,000 Container 50,000 Tørrbulk 40,000 Bill. USD Ro-Ro cargo 30,000 Råolje 20,000 Kjemikalie 10,000 Gass (LNG og LPG) 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 est. General cargo Offshore Other segments Chemical Dry bulk Container Andre segmenter Gas (LNG and LPG) General cargo Ro-ro cargo Crude oil Oil products Offshore 15
The Norwegian-controlled foreign-going fleet The Norwegian-controlled foreign-going fleet has seen a steady growth both in number of ships and by tonnage for the last couple of years and stands at 1,787 ships per 1 January 2019. Through 2017 and 2018, the fleet has grown by 71 vessels, and over eight per cent measured in deadweight tonnage. The Norwegian International Ship Register (NIS) alone has seen a good growth in recent years, and stands at 614 ships per 15 March 2019. The Norwegian Ordinary Ship Register (NOR) has weakened somewhat in the foreign-going fleet during the same period. The composition of the fleet shows that offshore service ships make up the largest segment, measured in number of ships. 1 spalte-mal 1 spalte-mal 1 spalte-mal The Norwegian controlled foreign-going fleet -Development NIS and NORinregistered vessels 2014-2019 the Norwegian-controlled The Norwegian-controlled foreign-going Development in the Norwegian-controlled The Norwegian-controlled foreign-going fleet fleet foreign-going fleet 2009-2019 sailing under foreign flags as of 1 January 2019 foreign-going fleet 2009-2019 – largest foreign flags as of 1 January 2019 900 70 % Antall skip NIS 1,900800 200 70 % 48 60 % Mill. dwt (høyre akse) 1,850700 Antall skip NOR 60 % 46 50 % 1,800600 150 Andel rederier 50 % Antall skip 40 % Number of ships 500 44 Andel rederier 1,750 40 % 400 30 % 1,700 100 42 300 30 % 20 % 1,650 200 40 20 % 1,600 50 10 % 100 38 10 % 1,550 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 Diesel Tungolje Batteri H 1,500 36 0 (HFO) 2009 2010 2011Antall 2012skip2013 Diesel Tungolje Batteri Hydr NOR 2014 2015Antall 2016 skip2017 NIS 2018 2019 as e ds ta us os UK an r ria ta or al m pr an ad (HFO) M be al ap M ha Cy br sl rb of Li 1 spalte-mal ng Short sea Deep sea lI Ba Gi Ba le al Si Number of ships (left axis) Mill. dwt (right axis) Is sh ar Short sea Deep sea Of M The5: Norwegian-controlled fra foreign-going fleet The Norwegian controlled foreign-going fleet The Figur Samlet omsetning Norwegian-controlled leveranser foreign-going by flag and ship type tilb fleet as of 1 January olje-/gasselskaper y flag 2019 og - NIS and NOR registered vessels 2014-2019 and ship type as of 1 January 2019 60 900 1 000 Antall skip NIS Komb 50 900 800 700 800 Antall skip NOR Passa 40 700 00 % ships 600 of NOK Bøyela 600 500 Mrd. 30 500 Andre Number 400 400 300 Bulksk 20 300 200 200 Gassta 100 10 100 Kjemi 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 NOR NIS Foreign flags Andre Number of ships NOR Number of ships NIS Short sea Offshore service Deep sea Other dry cargo vessels Offshore service Chemical tankers Offsho Gas tankers Bulk carriers Other oil tankers 2016 2017 2018 Shuttle-/storage tankers Passenger vessels/ferries Combined carriers Figur 5: Samlet omsetning fra leveranser til olje-/gasselskaperFigur og off 5 60 Figur 60 5 16 50 60 50 50 40 40
Short sea Shipowners in the short sea segment, also called short The Norwegian Shipowners’ Association’s members sea shipping, transport passengers and all types of in short sea shipping control about 130 vessels. The goods. They operate in Norway, between Norwegian industry contributes to efficient logistics and transport and European ports, and between ports in Europe. solutions, and with a single cargo, one short sea vessel 1 spalte-mal A total of 40 per cent of European domestic transport can take volume corresponding to 200-400 trucks off is by ship. This illustrates the importance of short the road. sea shipping in meeting commercial transport needs, and for the competitiveness of Norwegian industry. Most important markets Significant markets for short sea shipowners For almost 90 per cent of the short sea shipping Significant markets for short sea shipowners companies, Germany is the most important market. 100 % Germany has strengthened its position as the 70 %most Tredje viktigst important market in this segment compared60to % 2018. 80 % The United Kingdom has passed Norway as the second Nest viktigst 50 % most important market for short sea shipping. More Andel rederier Viktigst 60 % than half of the shipping companies in this segment 40 % cite the UK as one of the most important markets. 30 % 40 % 20 % 20 % Norway has remained stable as one of the most 10 % important markets for short sea shipping. About half 0 0% the companies name Norway as one of their most Germany UK Norway Denmark Sweden The Diesel Tungolje Batteri H Netherlands important markets. (HFO) Most important Second most important Third most important Short sea Deep sea 100 % Tredje viktigst 80 % Nest viktigst Viktigst 60 % 40 % 20 % 0% d a e k e nd n ar ni rg ig le n la la an er Po nm No sk er Sv it d Da Ty br Ne or St Figur 5: Samlet omsetning fra leveranser til olje-/gasselskaper og 60 50 40 Mrd. NOK 30 20 17 10
Deep sea The deep sea fleet consists of several segments where Most important markets Norwegian shipping companies are world leaders and Deep sea shipowners name China and the US as hold large market shares. These segments include their two most important markets, followed by car freight, dry bulk, LNG, chemical and general Brazil, India, Norway and Australia. More than cargo. Sailings cover large distances, often between 90 per cent of shipping companies rank China as continents. Norwegian Shipowners’ Association one of their most important markets. This represents members in the deep sea segment control over a significant increase from last year, when 75 per 1 spalte-mal 600 ships calling at ports around the world about cent of shipowners stated the same. The US has 30,000 times a year. The companies maintain many also strengthened its position as the second most offices abroad, giving the Norwegian shipping industry important market for the deep sea shipowners. a strong presence on all continents. 75 per cent name the United States as one of their Significant markets for deep sea shipowners most important markets, up from around 60 per cent Significant markets for deep sea shipowners the previous year. 100 % 70 % There is aviktigst Tredje significant gap down to Brazil and India, 60 % 80 % followed by Norway, Australia and Japan. The wide Nest viktigst 50 % range of markets shipowners name as their most Andel rederier Viktigst 60 % important indicates the global nature of transport 40 % in this segment. All continents are included among 30 % the 40 % most important markets, with the exception 20 %of Africa. 20 % 10 % 0% 0 China USA Brazil India Norway Australia Japan Germany Diesel Tungolje Batteri Hyd (HFO) Most important Second most important Third most important Short sea Deep sea O
Offshore Norway is one of the world’s largest offshore maritime Most important markets nations. Shipowners participate in all phases of For the offshore shipping and offshore drilling petroleum activity, from the first seismic surveys to companies, Norway and the UK maintain their position exploration and production, and decommissioning of as the most important markets. More than 70 per cent depleted fields. The Norwegian offshore fleet has a of the offshore shipping companies report these two high number of vessels for the transport of supplies and countries as the most important, and 85 per cent of equipment to and from offshore installations. The North the offshore drilling companies state the same. About Sea and the Norwegian Continental Shelf are the most 40 per cent of shipowners in both segments name important markets for the Norwegian offshore industry, Brazil as one of their most important markets. This remaining a critical arena for ensuring the international is about double that of last year’s survey. competitiveness of offshore shipowners. In addition, presence is high in other countries. The members of For offshore shipping companies, the US has the Norwegian Shipowners’ Association control over significantly strengthened its position, with as many 50 mobile offshore units, and a large offshore fleet as 30 per cent of shipowners reporting the US as one consisting of around 550 vessels. of their most important markets. Only seven per cent of offshore shipping companies report Denmark as an 1 spalte-mal 1 spalte-mal important market, a significant reduction from 28 per cent last year. Denmark has strengthened its position among offshore drilling companies. 25 per cent of these report Denmark as an important market. Significant markets for Significant markets for offshore shipping companies offshore drilling companies Significant markets for o ffshore shipping companies Significant markets for o ffshore drilling companies 80 % 100 % 70 % Tredje viktigst Tredje vik 70 % 60 % 80 % Nest viktigst Nest vikti 60 % 50 % Andel rederier 50 % Viktigst Viktigst 60 % 40 % 40 % 30 % 40 % 30 % 20 % 20 % 20 % 10 % 10 % 0% 0% 0 Norway UK Brazil USA The Australia Germany Norway UK Brazil Denmark Australia Canada Diesel Tungolje Batteri Hydro Netherlands (HFO) Most important Second most important Third most important Most important Second most important Third most important Short sea Deep sea Of 80 % Tredje viktigst 70 % Nest viktigst 00 % 60 % 50 % Viktigst 40 % 30 % 20 % 10 % 0% e ia il A nd ia d ria a as ol rg an US nn al rla ge g No Br tr l sk An ita Ni de s Au Ty 19 br Ne or St Viktigst Nest viktigst Tredje viktigst
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Norwegian Shipowners’ Association’s Member survey 2019 A positive outlook demanding situation with many ships in layup, low The world economy is growing. According to the rates, and short-term contracts. This situation is IMF, growth was at 3.7 per cent in 2018, while the not sustainable, and the offshore segments will be prognosis for growth in 2019 is 3.5 per cent, and characterised by further restructuring and refinancing 3.6 per cent for 2020. again in 2019. There is an imbalance in the offshore markets, with the oil companies showing strong Shipowners have faced major readjustments over the profits, while suppliers are under pressure to cut past years, mainly due to the financial crisis and the costs, and facing rates that hardly cover operating drop in oil prices. costs. Sustainable profitability throughout the value chain is an absolute prerequisite. However, there are The transport segments, comprising the deep sea and signs of greater optimism compared to previous years. short sea shipping companies, have gradually increased This is also reflected in expectations for staffing and their turnover since the financial crisis hit the industry construction of ships in going forward. in 2008. These segments now account for 60 per cent of total turnover among shipping companies. Since the fall in oil prices in 2014, the transport segments have Shipowners expect increased revenue strengthened their relative position compared to the Shipowners’ total revenue increased by 11 per cent, offshore segments. from NOK 206 billion in 2017 to NOK 229 billion in 2018. This means that shipowner revenue increased The offshore segments have faced extremely significantly more than expected in last year’s Maritime challenging times since 2014. The offshore segments Outlook Report. All segments experienced growth, comprise the offshore shipping and offshore drilling but deep sea shipowners in particular grew strongly companies. Revenue and profitability are still far lower in 2018, this is among others driven by an increase than before the oil price fall, and thus so far not at in freight rates in the second half of 2018. Offshore sustainable levels. drilling companies were the segment with the lowest growth in 2018. Norwegian Shipowners’ Association members have undergone a change of outlook over the last two For 2019, shipowners expect a further increase in years. All segments experienced revenue growth revenue. 60 per cent of shipowners expect increased in 2018. turnover in 2019, while 20 per cent expect reduced turnover, and 20 per cent unchanged. If the forecast is All segments anticipate growth in turnover and accurate, shipowners’ total revenue will end at about improved profitability in 2019. At the same time, NOK 240 billion in 2019, up almost five per cent from we see that the offshore segments will still face a last year. 21
1 spalte-mal 1 spalte-mal Norwegian shipowners' turnover 2007 - 2019 (including 2018 estimates and 2019 prognosis) Change in Norwegian Change shipowners’ in Norwegian turnover shipowners' fromfrom turnover Norwegian shipowners’ turnover 2007–2019 the previous year (including 2018 estimates and 2019 (including 2018 estimates and 2019 prognosis) the previous year (including 2018 estimates and 2019 prognosis) prognosis) 120 25 % 23 % 100 70 % 20 % 60 % 80 15 % Bill. NOK 10 % 9 % 9 % 11 % 50 % 10 % 8% 60 Andel rederier 5% 5% 40 % 5% 2% 40 0% 30 % -5 % 20 20 % -10 % -7 % 10 % -11 % 0 -15 % 20 20 20 20 20 20 20 20 20 20 20 E2 P2 0 01 07 08 09 10 11 12 13 14 15 16 17 01 -20 % 8 9 -20 % Diesel Tungolje Batteri H 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E2018 P2019 Deep sea Short sea Offshore shipping Offshore drilling (HFO) Short sea Deep sea Growth in turnover for 2018 was significantly higher Offshore drilling companies’ revenue was almost P2019 than forecast in the Maritime Outlook Report from halved from 2016 to 2017, and they experienced weak last year. A total growth in turnover of three per cent growth in 2018. OffshoreE2018 drilling companies expect was predicted, while the reported figures for 2018 revenue to rise by two per cent and end at NOK 39 2017 show revenue increasing by 11 per cent. This gap is billion in 2019. 2016 partly due to the fact that deep sea shipowners, who expected growth of four per cent, had a growth of 2015 The offshore shipping companies had a turnover of 19 per cent. In addition, offshore shipping companies, about NOK 100 billion in 2014 2014, but saw that halved 25 % who originally expected a fall in turnover of two per from 2014-2017. In 2017, revenue fell to NOK 52 20 % 2013 cent, experienced growth of seven per cent in 2018. billion. The period 2017-2019 has shown a growth in 15 % 2012 turnover. For 2019, the forecast is for growth of six 10 % The major drop in revenue among offshore shipping per cent and turnover of 2011 NOK 60 billion. 5% and offshore drilling companies following the drop in 0% 2010 oil prices in 2014 still characterises the industry to a -5 % large extent. 2009 -10 % -15 % 2008 -20 % Figur 5: Samlet omsetning fra leveranser til olje-/gasselskaper og 60 22 50
1 spalte-mal Shipowners' expectations for operating result This cautious optimism among offshore shipping Shipowners’ expectations compared tofor theoperating result previous year and offshore drilling companies is assumed based compared to the previous year on the market being weak, but improving. There are 60 % 54 % 51 % expectations of gradually increasing activity levels 50 % and better capacity utilisation. 40 % 30 % 27 % 20 % Deep sea shipowners experienced a sharp growth of 10 % 19 per cent in 2018, and they expect growth of five 0% per cent in 2019. If forecasts are accurate, this will 10 % 20 % give them a total turnover of NOK 120 billion in 2019. 19 % 30 % 23 % This makes deep sea shipowners by far the largest 40 % 49 % segment measured in turnover. 50 % 2017 2018 2019 Improved profitability Weakened profitability Short sea shipping companies show steady and stable growth. The annual growth rate in recent years has been around five per cent. This seems Short sea and deep sea shipowners are most optimistic likely to continue, overall turnover is expected to in terms of profit expectations, with about 60 per be NOK 22 billion in 2019. cent anticipating improved operating results in 2019 compared with 2018. At the same time, we see that these shipowners are somewhat more subdued in their Improved profitability optimism compared to a year ago. At that time, 67 per Over the past two years, shipping companies have cent of short sea shipowners and 77 per cent of deep become more positive regarding trends in profitability. sea shipowners expected better results. Both short More than half now expect operating results to sea and deep sea shipowners highlight the challenge of improve in 2019 over 2018. By comparison, half the rising costs and extensive environmental investments. shipping companies expected weaker profitability in The proportion expecting weaker profitability is low for 2017. This change in attitude has evolved over the last both segments. two years. Approximately half of offshore shipping and offshore One in five shipowners expect weaker profitability in drilling companies expect improved profitability. The 2019 compared with 2018. One year ago, one in four biggest change in profit expectations is found among shipping companies thought the same. the offshore drilling companies, where 25 per cent expected improved profit in 2018, with that figure 23
rising to 53 per cent for 2019. 27 per cent of offshore Tight access to capital drilling companies expect weaker results in 2019. One The maritime industry is highly impacted by current year ago, 38 per cent of offshore drilling companies affairs. Since the financial crisis in 2009, the Norwegian expected the same. and international economies and trade have been characterised by lower and unstable growth. The sharp For offshore shipping companies, the proportion fall in oil prices in 2014 has had major consequences expecting increased profitability has risen from 35 per in the maritime industry. We see this primarily through cent in 2018 to 47 per cent in 2019. The proportion reduced oil and gas activity. Shipowners’ access to expecting weaker profitability has decreased from capital is also greatly affected by this. 32 per cent to 25 per cent. Shipowners’ access to capital was gradually weakened For offshore shipping and offshore drilling companies, in the period from 2014 to 2017, while in 2018 there these expectations do not mean that an improvement was an improvement in the capital market. In 2019, we in operating result is synonymous with sustainable once again see a worsening situation, with shipowners profitability. There have been significant reductions now considering access to capital as tighter compared to in both revenue and profitability. Markets are still last year’s Maritime Outlook Report. The share deeming 1 spalte-mal challenging, with overcapacity of tonnage and low access to capital as good has decreased from 22 per 1 spalte-mal rates. In addition, shipping companies have undertaken cent in 2018 to 19 per cent in 2019. Of those considering comprehensive measures to increase profitability. access to capital as tight, the share has increased from 39 per cent in 2018 to 47 per cent in 2019. Shipowners' expectations for operating Change in perceived access Shipowners’ expectations for operating r esult in 2019 result in 2019 compared to 2018 compared to 2018 to capital from 2014–2019 Change in perceived access t o capital from 2014–2019 70 % 70 % 50 % 46 % 59 % 62 % 60 % 40 % 53 % 60 % 50 % 47 % 30 % 26 % 22 % 22 % 40 % 50 % 19 % 20 % 15 % Andel rederier 30 % 10 % 40 % 20 % 0% 10 % 30 % 10 % 20 % 20 % 0% 30 % 10 % 29 % 29 % 10 % 8% 40 % 20 % 14 % 39 % 25 % 27 % 50 % 55 % 0 47 % 30 % 60 % 60 % Deep sea Short sea Offshore shipping Offshore drilling Diesel Tungolje Batteri H 2014 2015 2016 2017 2018 2019 (HFO) Improved profitability Weakened profitability somhet Good Tight Short sea Deep sea nsomhet 24
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There are large variations between segments many of these shipowners experienced an unexpected 1 spalte-mal regarding the perception of access to capital. Offshore worsening in the capital market during 2018. Among shipping and offshore drilling companies appear to be the deep sea shipping companies, two out of three facing the most demanding situation, with 64 per cent expect unchanged access to capital in 2019. and 71 per cent, respectively, considering access to capital as tight. This is a significant deterioration for Expectations Expectations for access for access to to capital capital in 2019 in 2019 these groups since 2018, when about half thought the 40 % same. None of the offshore drilling companies believe 33 % 30 % that access to capital is good. 19 % 20 % 14 % 11 % 10 % Among deep sea and short sea shipowners, about 0% 30 per cent consider access to capital to be good, 10 % while there is wide variation among short sea shipping 20 % 15 % 17 % companies. 30 % 32 % 40 % 50 % 43 % Tighter capital markets ahead Deep sea Short sea Offshore shipping Offshore drilling Shipowners’ expectations for capital markets are Better Worse clearly weaker compared with last year’s Maritime Outlook Report. 18 per cent of shipowners expect In general, access to capital is perceived as tighter better access to capital in 2019, while one year ago 32 for small and medium-sized enterprises, those with per cent expected the same. turnover up to one billion NOK. The larger companies with more than one billion NOK in turnover are more Offshore shipping and offshore drilling companies are positive regarding access to capital. clearly the most pessimistic towards the development 00 % of capital access in 2019. One reason for this may be that the offshore industry will continue to be Fewer ships and rigs in layup characterised by further restructuring and refinancing. Vessels in layup lose value while still costing owners money. In February 2019, shipping companies had Short sea shipping companies are most optimistic 112 vessels and 20 rigs in layup, while in February about the development of capital access for 2019, with 2018 there were 137 vessels and 25 rigs in layup. This one-third of these expecting better access to capital. shows a reduction in the number of ships and rigs in However, this must be seen in light of the fact that layup, with peak layup being reached in February 2017. 26 Figur 5
1 spalte-mal Vessels in layup, from 2015-2019 Vessels in layup, from 2015-2019 Half of shipowners will order ships In this year’s survey, half of shipowners state that they 200 70 % will order new ships or rigs over the next five years. 180 60 % 160 The shipowners consider to build a total of 137 ships 140 and five rigs, mostly in the transport segments. 50 % Andel rederier 120 40 % 100 The short sea shipping segment expresses a need and 30 % 80 a strong desire for fleet renewal. The potential for 60 20 % testing new climate and environmental technology is 40 great in short sea shipping, as distances are10shorter % 20 and calls more frequent than for ships in deep 0sea and 0 Feb.15 Feb.16 Feb.17 Feb.18 Feb.19 Prognosis offshore shipping. The average age of vessels among Diesel Tungolje Batteri H end of 2019 (HFO) members of the Norwegian Shipowners’ Association Deep sea Short sea Offshore shipping Offshore drilling in short sea shipping is 22 years. Eight out of ten short Short sea Deep sea sea shipowners are considering to order new ships Primarily offshore shipping and offshore drilling over the next five years. This means that the potential companies report having vessels and rigs in layup for renewal in the short sea fleet is great, and that the as of200 February 2019. Offshore shipping companies average age of short sea vessels will be reduced. The have 26 fewer vessels in layup, while the number of corresponding figure is four out of ten for offshore rigs 150 has fallen by five. Among the deep sea shipping shipping companies, 00 % and half of all deep sea shipown- companies, one ship is reported to be in layup. No ers. Almost four out of ten offshore drilling companies short100sea shipping companies report ships in layup. are considering building rigs, up from around one in ten in 2018. Layup forecasts for 2019 indicate that the number 50 of ships and rigs in layup is expected to fall to 93, a Deep sea shipowners consider to order 76 ships, reduction of 34 ships and five rigs. Of these, offshore followed by offshore shipping companies with 0 shipping companies feb.15 feb.16 control feb.17 33 vessels and deep sea feb.18 Prognose feb.19 Prognose 33 vessels, and short sea shipping companies with shipowners one ship. 31.12.2018 31.12 28 vessels. This reduction in the number of ships and rigs in layup is due to a combination of increased activity, ship recycling, and sale of vessels. Figur 5: Samlet omsetning fra leveranser til olje-/gasselskaper og 60 50 27 40 OK
1 spalte-mal Number ofNumber of ships ships and that shipowners rigs that shipowners anticipate More than 40 per cent of shipping companies consider building in the coming five years anticipate building in the coming five years Norwegian shipyards as relevant for the construction of their vessels. Among short sea shipowners, 70 %half Offshore drilling 5 consider Norwegian shipyards to be relevant. Among 60 % offshore shipping companies, seven out of ten consider Offshore 50 % shipping the same. Norwegian shipowners are very important Andel rederier 33 for Norwegian shipyards and supplier industry,40 %and this can lead to increased activity in the Norwegian 30 % Deep sea 76 maritime cluster. 20 % 10 % Short sea Considerable increase in employment in 0 2019 28 1 spalte-mal For 2018, shipping companies report a net increase Diesel Tungolje Batteri H (HFO) Deep sea Short sea Offshore shipping Offshore drilling in the number of employees. A total of 1,369 persons Short sea Deep sea were terminated or placed on leave by shipping companies in 2018. This is an improvement of the Percentage of shipowners who will use Percentage of shipowners who will use Norwegian situation compared to 2015–2017, with shipping Norwegian yards for building new vessels yards for building new ships and rigs companies reporting about 20,000 employees either 100 % terminated or placed on leave. At the same 70time, % 86 % 2,919 people were hired in 2018, 40 per cent of these 60 % 80 % in offshore drilling companies. Overall, shipping 69 % 67 % companies hired a total of 1,550 employees50in%2018. Andel rederier 60 % 40 % 50 % 50 % 90 per cent of those terminated or placed on leave in 30 % 40 % 31 % 33 % 2018 worked in offshore shipping and offshore 20 % drilling companies. These are the segments with the largest 20 % 14 % 10 % proportion of Norwegian employees, which means 0% that a large proportion of those terminated or 0placed Deep sea Short sea Offshore Offshore Diesel Tungolje Batteri H shipping drilling on leave are Norwegians. In total, 890 Norwegian (HFO) Yes No employees were terminated or placed on leave in Short sea Deep sea 2018, representing a 65 per cent share. Figur 5: Samlet omsetning fra leveranser til olje-/gasselskaper og 60 28 50 00 % 40
About half of those placed on leave or terminated were All segments expect a significant increase in offshore drilling employees. Seafarers and onshore employment in 2019. Overall, companies expect to workers accounted for about one quarter each. hire almost 2,500 new employees, with around 300 being terminated or placed on leave. This Employees placed on leave made up 34 per cent of means that companies will employ about 2,200 more total workforce reductions in the shipping companies workers in 2019 than in 2018. Deep sea and offshore in 2018. This is up from 22 per cent in 2017, and may drilling companies have the highest expectation of indicate that shipping companies are more inclined to 1 spalte-malgrowth, followed by offshore shipping employment believe that they will need to increase staff in 2019. companies. Short sea shipowners are expecting a 1 spalte-mal slight increase in the number of new employees. Among new employees in 2018, half were hired by Anticipated change in employment offshore drilling companies, and about one quarter Anticipated change in employment f or shipowning for shipowning companies, 2019 each by offshore shipping and deep sea companies. companies, 2019 1,200 Change Change in in employment employment in in shipowning shipowning companies, companies, 2018 2018 1,002 1,014 1,000 1,400 70 % 800 1,200 1,301 60 % 1,000 600 800 424 50 % 866 400 795 600 Andel rederier 40 % 400 200 82 200 30 % 27 0 0 26 33 46 20 % 200 120 200 124 110 400 Deep sea Short sea Offshore 10 %Offshore 428 shipping drilling 600 795 0 800 Total new hires Total terminated and placed on leave Deep sea Short sea Offshore Offshore Diesel Tungolje Batteri H shipping drilling (HFO) Number of new hires Number of terminated and placed on leave Short sea Deep sea 1200 1000 800 600 1500 1200 400 900 200 600 0 300 00 % 29 -200 0
The Norwegian Shipowners’ Association: In our view 30
1 Shipowners need stability to operate from Norway The maritime industry competes globally Repealing the wealth tax will strengthen The Norwegian maritime industry is a knowledge- private ownership intensive, thoroughly globalised industry. About 40 per cent of the country’s value creation in Internationally competitive framework conditions the business sector takes place in companies with are crucial if Norway is to maintain its position as a Norwegian private ownership. In the Norwegian maritime power. The industry employs 85,000 people maritime industry in general, there is a high degree in Norway and creates value of NOK 142 billion of private ownership. Many Norwegian shipping annually. Norway has a complete maritime cluster, companies are characterised by fully private ownership, with world leaders in most segments, including with Norwegian, long-term owners as the primary shipowning, classification, financial institutions, stakeholders. Competitive framework conditions for shipyards and equipment suppliers. At the core of this Norwegian private ownership are central to the further cluster are the shipowners. They make up the largest development of maritime value creation in Norway. segment of the maritime industry, measured in both The most important measure for strengthening value creation and employment. The shipowners also access to competent and patient capital, and creating 1 spalte-mal ensure that the industry has access to experience- opportunities in Norway, is to remove the wealth tax based expertise from the sea. on working capital. This is supported by the responses from shipowners in the member survey. 97 per cent Impact on shipowners as a consequence of shipowners state that repealing the wealth tax on of a possible weakening of Impact on shipowners as a consequence of a possible the Norwegian tonnage tax regime working capital is important to ensure competitive weakening of t he Norwegian tonnage tax regime framework conditions for Norwegian private ownership. 0% 70 % 10 % Tonnage tax determinates 60 % 20 % for Norwegian presence 50 % Andel rederier 30 % A competitive Norwegian tonnage tax regime 40 is % 40 % essential for maintaining Norway’s attractiveness 30 % as a 50 % host country for shipping companies and other 20 % maritime 54 % 60 % activities. About eight out of ten shipping companies, 10 % 70 % state that a weakening of the Norwegian tonnage tax 80 % 74 % 74 % regime will affect their business very negatively 0 or Deep sea Short sea Offshore shipping Diesel Tungolje Batteri H negatively. Last year, six out of ten shipping companies (HFO) Positive Negative responded that it was probable or very likely that Short sea Deep sea they would move their business out of Norway if the Norwegian tonnage tax regime was significantly 10% 0% -10% 31 -20% -30%
weakened. It was therefore well received when the Proactive maritime policies lead to Government and Parliament in 2018 extended the flagging home tonnage tax scheme for another ten years. Stable, competitive schemes are important for retaining and developing maritime businesses in Norway. Furthermore, a large number of ships under Competitive tax refund scheme ensures the national flag is important for Norway’s influence Norwegian seafarers internationally. Norwegian-registered ships have In order to secure Norwegian operational maritime historically also provided an important base for competence and contribute to the recruitment of the further development of Norwegian maritime Norwegian seafarers on Norwegian-registered vessels, competence. a competitive net wage scheme is crucial. Nearly nine out of ten shipping companies say it is likely that they will replace Norwegian seafarers with foreigners if 1 spalte-mal 1 spalte-mal the tax refund scheme for Norwegian seafarers is significantly weakened. Probability that Norwegian seafarers will be Potential for flagging ships to the Norwegian Probability that replaced byNorwegian seafarers non-Norwegians willtax if the berefund r eplaced Potential for flagging ships to the Norwegian r egisters registers (NIS/NOR) from 2017 to 2019 by non-Norwegians if the are schemes for seafarers tax significantly refund s chemes for weakened (NIS/NOR) from 2017 to 2019 seafarers are significantly weakened 70 60 % 70 % 60 60 % 50 % 50 Number of ships 50 % 40 % 40 Andel rederier 40 % 30 % 30 30 % 20 20 % 20 % 10 10 % 10 % 0 Deep sea Short sea 0 shipping Offshore 0% Unlikely 2 3 4 Very likely Diesel Tungolje Batteri Hy 2017 2018 2019 (HFO) Short sea Deep sea 32
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