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SINGAPORE SHIPREPAIRING, SHIPBUILDING & OFFSHORE INDUSTRIES DIRECTORY 2020/2021
The marine and offshore industry is in tough terrain. The global oil market crash in October 2014 precipitated a prolonged industry cyclical downturn. Today, the industry continues to grapple with volatile oil prices. Competition and geopolitical uncertainties are heating up. Structural changes in the global energy arena are like shifting sands - we must keep up and keep going.
The nancial indicators of 2019 pointed to better days ahead. Keppel Offshore and Marine Ltd (Keppel O&M) returned to pro tability and scaled up hiring on increased workload. Sembcorp Marine Ltd (Sembmarine) bolstered its orderbook with notable order wins. Both companies logged in higher amounts of order wins in 2019 compared with the year before.
When we entered 2020, our eyes were xed on the comeback trail. In the business expectations survey of the manufacturing sector for January to June 2020, Singapore’s Economic Development Board (EDB) noted that in the transport engineering cluster, a net weighted balance of 15 per cent of rms foresee better business prospects in the rst half of 2020, compared to the preceding quarter. Within the cluster, the marine and offshore engineering segment continues to anticipate a modest uptick in demand for ship repairing activities and oil and gas- eld equipment.
Signs are there, that we are turning the corner. Until a curve ball appears.
BRAVING THE STORM: COVID-19
What began as an epidemic affecting some parts of the world at the beginning of the year had escalated quickly to become a global pandemic by March 2020. The COVID-19 situation is evolving, and the effects will take time to unravel. What is clear is the adverse impact on global demand for oil, hence oil prices, affecting the entire oil and gas value chain.
Although the trigger for the current oil collapse is different, the consequences are similar. Low oil prices lead to cutback in exploration and production by large oil companies causing downstream consequences such as cancellation of contracts for offshore projects. Weak oil prices exacerbate challenges to pro tability, creditworthiness and employment opportunities.
Divestments and restructuring, an ongoing response since the last crisis, will help mitigate some of the impact, but the sector remains vulnerable. The impact of the COVID-19 global pandemic on the industry - which is made up of SMEs and large rms involved in a diverse range of business interests - will be uneven. Smaller players will be more severely affected as the need for servicing debt burdens, or repaying/ re nancing maturing debt against a backdrop of weak cash ows and declining asset values poses signi cant risks to such rms. Firms relying on imported parts and raw materials are
STOIC AMIDST A STORM
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