New players snap up cheap OSVs driving up S&P activity, but oversupply persists as too few vessels are leaving the market
While S&P activity is at its highest level since 2019 – with some “occasional” offshore supply vessels sent to the breakers – there remains plenty of work to be done to fix the oversupply of vessels in the market, according to a leading shipbroker.
Fearnley Offshore Supply points out that new players are picking up cheap vessels against a contract and making significant returns due to their low entry levels.
Fearnley says that despite the recent high transaction levels, “there is yet to be any price movement for the mid-sized anchor-handling tug supply (AHTS) vessels and platform supply vessels (PSVs). There are still too many vessels on the water; however, as we seemingly have reached a floor, prices have bottomed. For these asset classes, depressed prices will likely be the rule for some time; for every vessel leaving the market, there are 10 idle vessels with no work.”
S&P activity in the OSV market saw 57 vessels exchanging hands, generating sales of US$153M at the end of April, according to a report by UK-based ship valuations firm VesselsValue (VV). The data indicates that S&P activity aligns with the last two years, when 57 OSVs were sold in 2020 and 60 in 2019. Total sales in 2021, however, are lower than past years, when transactions generated sales of US$171M in 2020 and US$35M in 2019 during the first four months of each year. For this analysis, the S&P data does not include sales of fast supply vessels (FSVs) nor PSVs of 300 dwt and under.
In May, two offshore vessels were sold. In one transaction, Norway’s Farstad Supply AS, a wholly owned subsidiary of Solstad Offshore ASA, sold the PSV Far Splendour, which was handed over to an undisclosed buyer for an undisclosed price on 10 May. The 17-year-old PSV was built by Ulstein.
“There will be no market balance for mid-sized assets before we see far greater fleet attrition”
In another, Bank of America sold the 265-ft class liftboat Seacor Influence to Alliance Offshore LLC. The 2009-liftboat was built by Boconco.
Among the most active sellers of tonnage in the early part of 2021 were CH Offshore, Solstad and Tidewater, while Chinese organisations were the most willing buyers, according to Fearnley data.
Demolition sales for the first four months of 2021 have been slow, with only 22 OSVs sent to the breakers, generating US$18M in sales – less than US$1M per vessel. For the same period in 2020, there were similar low levels of demolition and prices, with only 14 vessels (US$8M in sales) sold for scrap. This was less than a third of 2019, when 49 OSVs (US$29M in sales) were sent to the breakers, according to VV’s report.
Among those sold for scrap was the 1999-built, UT 741 design Skandi Admiral. DOF sold the vessel for scrapping at the Green Yard Kleven in Norway. Most recently it had been chartered for work in Brazil, before being laid up in Norway since May 2019.
Such low levels of scrapping continue to hamper a market recovery. “We maintain that there will be no market balance for the mid-sized assets before we see far greater fleet attrition than we are seeing at present,” said Fearnley.
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