Shipbrokers are expecting the current offshore support vessel boom to last for many years.
Owners are enjoying much better rates as demand improves and tonnage has stayed scarce due to a lack of newbuildings.
Singapore brokerage M3 Marine’s chief executive Mike Meade told TradeWinds that market strength is here to stay for up to seven years after a downturn saw many vessels sold out of the sector.
Meade has worked through four or five cycles in his long career.
“I’m a true believer that this is a supercycle,” he said. “What’s different about this cycle is that this time we can’t kill it. Shipowners are their own worst enemies, we overbuild in the good times,” the CEO added.
The biggest problem when it comes to ordering newbuildings now is a lack of financing, Meade argues.
“The banks see oil and gas and say: ‘Forget it’,” he said. Funding through equity is the only way, Meade argues.
Newbuildings in China cost 40% more than during the last wave of ordering.
“I was over in China and there’s not a square inch of space to be seen at yards,” the CEO added.
Rates good, but not good enough
Deliveries will be in 2026 at the earliest.
“Charter rates are high but they won’t sustain the cost of newbuildings,” Meade argues.
US owner Tidewater believes new ships will have to achieve 90% utilisation over 30 years to make the investment back.
All this means that prices have gone through the roof for secondhand units.
Meade said that a 10-year-old platform supply vessel, PSV, used to be priced at $1m. They are now changing hands for $12m.
And prices are going up by $1m a week.
“My sale-and-purchase brokers are getting frustrated because the pool of ships is drying up, owners are seeing the rates and deciding to keep them,” the broker added.
He believes banks will eventually follow the cash flow. This could take three, four or more years, but they will lend to OSV owners again, he argues.
“Today it’s a waste of time,” he concluded.
The latest sale is Solstad Offshore’s 7,956-bhp anchor-handling tug supply, or AHTS, ship Nor Spring (built 2008) to an unnamed owner.
The ship is rated as worth $3.2m by VesselsValue, up from $2m two years ago.
The vessel has been in lay-up in Asia since 2020.
But Solstad said it would book an accounting gain of NOK 50m ($4.5m) from the sale, giving some indication of another rapid rise in prices.
A ceiling on prices?
Norway’s Fearnley Offshore Supply told TradeWinds: “Raising equity and debt for secondhand S&P and newbuilding opportunities can still be tough, leading to a ceiling on secondhand prices and limited newbuildings entering the market in the coming years.
“Combining this with a non-existent orderbook across traditional OSV segments such as PSV, AHTS and subsea tonnage, we believe this will lead to a strong market for at least three to four years,” the broker added.
Fearnley believes demand will always be difficult to forecast, but there is currently an attractive vessel supply side, where assets see higher utilisation and rates.
The previous OSV boom ended in 2015.
“We definitely benefited from having multiple business areas and revenue streams when the downcycle started. If you only focus on one revenue stream, it creates vulnerability in times of changing market conditions,” Fearnley said.
The Oslo shop offers valuations, chartering in both spot and long-term sectors, sale and purchase, newbuilding and advisory services.
“Having long-lasting relationships with a broad range of international clients also contributed, as we have been in business since the early 1970s and benefit from a track record in both poor and strong markets, leading to client loyalty also when the market is depressed,” Fearnley said.
“Looking forward, we aim to continue with a broad service offering to ensure we can support our clients according to their needs, as opposed to only following the highest profit opportunities,” the broker concluded.
