Tug newbuilding orders have increased on the back of rising demand for oceangoing and project towage and harbour support
Workboat newbuilding orders, particularly tugs, are on a roll, largely in response to changes in global trade and regulatory requirements. However, demand for new offshore support vessels (OSVs) has been in the doldrums since oil prices tumbled five years ago. But with oil prices rising, so the market seems to be improving, with an upturn in newbuilding orders driven by oceangoing towage requirements.
New import and export facilities for hydrocarbons, specifically crude oil, refined products and liquefied natural gas (LNG), are leading to rising demand for maritime support services. Changes in container-ship trade have led to larger ships calling at increasing numbers of ports and requiring more powerful tugs for berthing and manoeuvring operations.
Resulting workboat newbuilding orders have led to more contracts for propulsion and engineroom systems, with each tug newbuild requiring at least two main engines, two propellers or thrusters, generator sets, automation and control systems, plus pumps and wheelhouse equipment. Most also need a range of deck equipment, including capstans, winches and line handlers and fire-fighting systems.
The number of tug newbuilding contracts this year has already exceeded the total for 2017 and is likely to double last year's total. According to BRL Shipping Consultants, more than 80 tugs were ordered in the first six months of this year, compared with 75 during all of 2017. By 1 October, 133 tugs had been ordered, with 52 contracts signed in August-September alone. If a rate of 20 per month is maintained throughout the rest of this year, the 2018 total could exceed 190.
All these contracts had boosted the worldwide orderbook of tugs of all types to 297 vessels by 1 October, according to BRL.
Harbour tugs: 255
Tractor tug: 8
Salvage tug: 6
Pusher tug: 4
Other tugs: 14
Source: BRL Shipping Consultants (1 October 2018)
Among the busiest yards in this area have been Damen Shipyards and the Turkish shipbuilders, which construct tugs on a speculative basis, with the expectation that these can be sold to owners at a later date.
“Analysts forecast an improvement in support vessel requirements and rates over the next five years, as more mobile drilling rigs return to operations from layup”
Offshore segment improvements
Demand for windfarm construction and maintenance services has also led to newbuilding orders in the OSV sector. Rising oil prices hint at a return to better times, with global exploration and production investment expected to grow 5% per year between 2018–2023.
Analysts at Riviera Maritime Media’s Asian Offshore Support Journal Conference in Singapore, held at the end of September, forecast an improvement in support vessel requirements and rates over the next five years, as more mobile drilling rigs return to operations from layup.
However, there are still hundreds of vessels out of service and global utilisation continues to struggle at just 42%; this indicates how much demand needs to improve before owners can raise prices.
Nonetheless, there has been an increase in both the number of anchor-handling tugs ordered for oceangoing towage and the construction of fast crew supply vessels.
According to VesselsValue data, there are now 406 OSVs on order, with a combined value of US$4.77Bn. The global orderbook represents around 5% of the existing worldwide fleet of OSVs. This is driving an upturn in new deliveries, both this year and into 2019, with expected slippage of projects into 2020. We will likely see more deliveries of OSVs this year than any time since 2014, with most of the additions built for oceangoing towage.
Already 80 vessels with a combined value of US$1.13Bn have been delivered and there could be another 300 vessels delivered this year. The data is loaded with 2018 deliveries, which means some, perhaps many, of these are likely to enter service in 2019. In comparison, 115 vessels, with a combined value of US$1.57Bn, entered service in 2017.
During the market’s peak, between 2010 and 2014, more than 400 vessels entered the offshore support sector each year. This means that more than 60% of the existing OSV fleet is less than 15 years old and another 12% is 15-25 years old. The implication is that, outside of oceangoing towage, there is no age-related incentive to order new vessels.
Elsewhere in the workboat market we are seeing environmental factors drive growth, with tugs, multicats and other types of vessels being built to meet lower emissions expectations. This has driven the development of engines that comply with the top regulatory requirements under IMO, the European Union and the US Environmental Protection Agency.
North America: towage market set to rebound
Rosemary McAllister is one of the first tugs to meet US EPA Tier 4 requirements
Manufacturers in the US have reacted to stricter environmental rules by producing engines that comply with IMO Tier III and US Environmental Protection Agency (EPA) Tier 4 requirements. These have been installed on tugs with, for example, McAllister Towing operating two Tier 4 tugs on the US East Coast ports.
Capt Brian A McAllister commenced operations in Q4 2017 and was followed in Q2 2018 by sister tug Rosemary McAllister. These raised the performance and environmental bar for tug operations in the ports around Virginia, Maryland, New Jersey and New York at a time when large container ships are calling at these ports.
Other tugboat owners are following suit, with their own green vessel orders: Bouchard Transportation, C&C Marine, Overseas Shipholding Group, Island Tug & Barge, Vane Brothers, Reinauer Transport, Crowley Maritime and Kirby Corp have all ordered new articulated tug barge (ATB) combinations this year.
Kirby’s chief executive and president David Grzebinski summarised the US inland and coastal towage markets during a presentation for the company’s Q2 2018 results in July. He noted that the inland and coastal markets had bottomed-out and there was evidence of improvements in demand for tugs and barges in the US.
He said term contract pricing was starting to increase, “setting the stage for what we believe will be a further upward movement in pricing in H2 2018”.
“The [North American] inland and coastal markets have bottomed-out and there is evidence of improvements in demand for tugs and barges”
In the coastal towage market, Mr Grzebinski said there was potential for an improvement in contract rates. “We did see a positive shift, with a few spot contracts repricing modestly higher,” he said. Utilisation of Kirby’s coastal towage assets was in the low- to mid-80% range, leading Mr Grzebinski to comment: “While these trends are encouraging, we continue to expect the coastal market will remain challenging for the remainder of 2018 and into 2019.”
There was an improvement in inland marine transportation in Q3 2018, with utilisation rising to the low- to mid-90% range. “We continue to expect that industry-wide barge retirements and additional petrochemical capacity will yield favourable industry utilisation rates throughout the remainder of 2018,” said Mr Grzebinski.
He also expects more term contract renewals will yield an improvement in prices and inflate operating costs, saying “As the inland market has started to recover, the labour market has tightened.”
As a result, Kirby has increased wages for its inland mariners and shore staff. Mr Grzebinski anticipates that utilisation rates will improve in the coastal towage market to around 85% during the rest of this year.
“We are confident that the marine transportation segment has bottomed, and expect further improvement as the inland market”
Mr Grzebinski is also positive for the longer term, noting: “We are confident that the marine transportation segment has bottomed, and expect further improvement as the inland market continues its recovery.” He still expects the coastal transportation market business to remain “challenging in the near term” but pointed to a stabilisation in rates and utilisation as evidence of improvements to come. He expects this market is “likely to rebound in the next year or so.”
Europe: towage market remains challenging
Kasper Friis Nilaus (Svitzer): “Our biggest challenge is to keep our business sustainable under the current commercial pressure"
Europe’s towage market is competitive and challenging for tugboat operators, as shipowners and port authorities face tough business conditions themselves. This puts pressure on tug owners to control costs, which affects their profits. To remain competitive, tug owners have invested in more powerful and efficient vessels, with SMS Towage, Targe Towage, Forth Ports, Kotug Smit and Svitzer introducing new tugs this year to their UK-based fleets.
Svitzer Europe managing director Kasper Friis Nilaus explained that mobilising tugs to the region improves the fleet, while transferring them between ports maintains utilisation. It has added two tug newbuildings – Svitzer Vale and Svitzer Meridian – and mobilised tug Svitzer Amazonas from South America into the European fleet this year.
Mr Nilaus said price pressures meant Svitzer’s customers are “cost conscious and desire the lowest possible prices” from towage and tug services. “Europe is the hardest hit from market pressures; despite this we have been able to grow our business with 3-4% more jobs compared to last year,” he said.
“Our biggest challenge is to keep our business sustainable,” he added. “Rates are under significant downwards pressure and it is difficult to grow in this market. To succeed we need our operations to be efficient.”
Svitzer Europe has the scale to compete in the UK, where it has its biggest fleet, and in Scandinavia, the Netherlands and Germany. “Our operating challenge is about maintaining fleet utilisation,” said Mr Nilaus. “It is about getting as much out of our tugs, to have high service levels with the lowest number of vessels.”
To achieve this, Svitzer Europe minimises the number of days that tugs are idle or unavailable due to technical issues. “We need tugs that are reliable, as if tugs break down we have problems,” said Mr Nilaus.
Tug maintenance is vital to continued profitability, but so is minimising drydockings. With its large fleet, Svitzer Europe has heavy drydocking schedules and strategies to reduce the time tugs remain in repair yards.
It conducts routine maintenance while tugs are outside repair yards, during quiet periods in their operations. “We do as much maintenance as possible outside of the dock to reduce the direct costs and the out-of-service costs,” said Mr Nilaus.
When tugs are moved into drydock, Svitzer Europe mobilises another tug for cover. Mr Nilaus said this was done in June when its 2018-built Svitzer Vale was mobilised from London to Bremerhaven, Germany, to cover a tug that went into drydock.
In southern Europe, Rimorchiatori Riuniti and its subsidiaries are sewing up the towage market through acquisitions and newbuilding orders. At the beginning of August, its subsidiary, Rimorchiatori Mediterranei, acquired a company that was part of rival group, Capieci Spa, for its towing service concessions in Sicily. This purchase consolidated Rimorchiatori Riuniti’s leadership in the port towing sector in that area, where it already has a presence through its subsidiary Rimorchiatori Augusta.
Rimorchiatori Riuniti expanded its services in mainland Italy through the addition of a new powerful escort tug; Paraggi completed its first towage project on 26 July as it manoeuvred a ship from Tulcea, Romania, to the Italian port of Genoa. It was built by Turkish shipyard Bogazici to a Cintranaval design.
In France and Spain, Boluda Corporacion Maritima has a strong towage market position that has resulted in further tug newbuilding orders. In May, Boluda contracted Piriou to build a new series of up to eight tugs for its operations in France.
These tugboats will be built in Vietnam to Piriou’s own design, for delivery in 2019 and 2020. Boluda already operates a fleet of 75 tugs and 30 service vessels in 15 harbours in France, Africa and in the Indian Ocean.
Asia: port requirements drive newbuilding levels
Tug newbuilding orders in Asia have increased this year and while the OSV sector continues to struggle, there are signs that a recovery is imminent. As an example of the buoyancy of towage and port operations in the region, eight tugs were ordered from a subsidiary of Formosa Plastics to support terminals in Taiwan in Q3.
It ordered tugs of three different sizes from Graha Trisaka, which operates an Indonesian shipyard, according to BRL Shipping Consultants. This included four harbour tugs with an overall length of 25 m, for delivery during Q3 and Q4 of 2019.
Graha Trisaka will also build three larger tugs of 33.5 m in length for escort duties and harbour towage between May and September in 2020, plus a 29.2-m tug for delivery in December 2019.
Other port operators in the region have also modernised their tug fleets. For example, Pelabuhan Indonesia III has taken delivery of 15 tugs from Indonesian shipyards for its port support services in that country over the past 12 months.
There has been an upturn in tugboat construction in China, with Cheoy Lee Shipyards and Jiangsu Zhenjiang Shipyard the major builders in the nation, although others such as Sanlin Shipyard, PaxOcean Engineering Zhuhai, Jiangsu Wuxi and Jiangsu Suyang Marine have also picked up orders this year.
Cheoy Lee builds many of its tugs to Robert Allan designs and on a speculative basis, with the expectation that they will be sold before or on completion. It sold two escort tugs, named SST Grizzly and SST Orca, to SAAM Smit Towage (SST) Canada at the end of September and these are expected to arrive in British Columbia in November.
In contrast, Jiangsu Zhenjiang builds tugs to its own design for mainly Chinese port authorities and vessel owners that are upgrading their fleets to comply with more stringent environmental rules and larger ship berthing.
From Russia to the Caspian
A major oil and gas project in Kazakhstan has resulted in a newbuilding series for a Dutch shipyard. Six tugs were ordered for towing heavy cargo on barges for the Tengizchevroil future growth project. Shipyard De Hoop completed construction of four large azimuth stern drive (ASD) tugs and two smaller ASD towboats by June this year.
These tugs are operated by a consortium consisting of Caspian Offshore Construction and Blue Water Shipping; they will transport barges full of oilfield machinery and infrastructure through Russian waterways and across the Caspian to the project in Kazakhstan.
The larger ASD ice-class tugs were built at the Lobith shipyard, with 42 tonnes of bollard pull. Their primary task is to assist with the transportation of barges and vessels with modular cargo, components and supporting equipment.
De Hoop built the two smaller vessels, Nauryzbay Batyr and Otegen Batyr, at its Foxhol facilities. They have 30 tonnes of bollard pull and are assigned to support the precise manoeuvring of barges at the cargo offloading facility in Prorva in Kazakhstan.
Project towage drives tug series orders
Damen supplied four pusher tugs and four multicats to Combi Lift
Major oil and gas projects requiring inland cargo towage have resulted in a new series of workboat orders. One of the biggest gas projects worldwide involves towage of 176,000 tonnes of cargo over a five-year period in eastern Russian rivers.
Gazprom’s Amur gas processing plant (GPP) construction project includes transporting cargo from the port of De-Kastri in the far east of Russia up the Amur and Zeya rivers to a terminal at Svobodny. Combi Lift has been tasked with completing these heavy transportations each Q2 and Q3, during ice-free periods, until October 2022.
To accomplish this, Combi Lift ordered eight towage workboats and seven barges from Damen Shipyards, to be operated by subsidiary AAS Amur Asset Shipping. These arrived in May this year to begin the heavy transport of project cargo. In the first phase of this contract, 79 pieces of cargo with a combined weight of 61,755 tonnes were transported from De-Kastri to Svobodny.
In designing the workboats and barges, Damen had to account for the two main project challenges, the severe weather conditions expected to be encountered and that some parts of the rivers had a depth of only 1.10 m.
Damen supplied four pusher tugs, each with a draught of 1.45 m for operations on the Amur River and four multicat vessels with shallower draughts of 0.85 m for the Zeya River. Damen also delivered seven 89-m Stan pontoon barges and four 86-m side floaters for this project.
Combi Lift’s pusher tugs were built to Damen’s 2612 SD design at the Hardinxveld shipyard in the Netherlands. They have an overall length of 24.9 m, a moulded beam of 11.9 m and a hull depth of 2.7 m. They have a displacement of 325 gt, bollard pull of 13.5 tonnes and maximum speed of 9.5 knots.
The shipyard also built workboats to a Multicat 2608 SD design, with an overall length of 25.9 m and moulded beam of 8.5 m. Their displacement is 145 gt and they have a bollard pull of 8 tonnes and a full speed of 9 knots.
Stan pontoons were designed with low weight and draught, while the side floaters provide extra lateral ballastable buoyancy to the pontoons. Each of the tugs and barges operate under the Russian flag and are classed by Russian River Register and the Russian Maritime Register of Shipping.