Winter 2017 Newsletter - Now What?

2017 - Now What?

Bob Beegle

What is coming down the pipe in 2017 and 2018? As of this week, I am more clueless than normal, but see 2017 to be a volatile and uncertain period. Once again, most sectors of the maritime industry face declines in trade, demand and freight / day rates. Overcapacity will still be with us - whether it be in tugs & barges, offshore supply / support vessels or container ships, as we are almost daily reminded. 2016 was a chaotic year, especially in the second half. Marcon saw more decisions on contracts, acquisitions and sales made on a spur of the moment “thumbs up” or “thumbs down” than at any other time in the past. Regretfully “thumbs down” outweighed “thumbs up”. I expect this to continue through the first half of 2017.

Marcon ended 2016 with 19 sales and charters concluded, the lowest number since 1988. Thankfully three 5,000HP+ tugs continue on long term charters and several major projects are progressing. Marcon broke the 1,000,000HP mark in tugs sold /chartered, ending up the year with nine twin screw tug sales totaling 26,490HP. Prices for most equipment continued to fall in the U.S. and overseas. This year’s average price per HP for the nine tugs sold hit a record low of $141.56 for an average “generic” 37 year old vessel compared to five tugs averaging 34 years of age selling in 2015 for $243.20/HP. In 2014, a generic, 41 year old tug sold for $282.55/HP and 2009 tug sales generated close to a record $426/HP for an average 1971 built tug.

Actual sale prices for vessels and barges sold by Marcon in 2016 averaged 90.63% of asking prices compared to 84.95% in 2015. What does this mean? After publishing our last tug market report, one trade journal reported Marcon’s sale prices then “averaged a healthy 95.49% of asking prices”. While the percentage reported was accurate, actual sales prices were lower than the previous year. What averages above 90% show us is that many Owners started quoting lower, more realistic numbers than in 2015 when vessels and barges sold at 84.95% asking price. Being realistic is “healthy”.

Of the nineteen sales and charters brokered by Marcon in 2016, four were foreign. Two of the nine tugs were fixed between foreign sellers and buyers. Although 10 other vessel & barge types were sold, the global towing industry will continue be Marcon’s strongest market segment in 2017 and 2018. This will be especially true taking into account the depressed state of the global offshore supply / workboat market. In the last 10 years, over 45% of Marcon’s sales and charters involved a foreign owner, buyer or charterer. Of the 13,133 vessels Marcon actively tracks, 70.4% are foreign flag. 70.5% of the 4,947 tugs and 83.7% of the 3,247 supply boats tracked are registered overseas. We are starting the New Year with over 957 tugs and supply boats for sale. 77.8% of these vessels are foreign. Marcon has been involved with the international market since our first overseas sale of a 4,500HP AHTS to Argentina in 1985. Regardless of any political or physical walls, the global market will always be key to our success.