Rid­ing the Vi­o­lent Waves of a Down­turn: Ad­vice from three different seg­ments

Norway-Asia Business Review - - Contents -

“We know mar­itime is a cycli­cal in­dus­try and we al­ways come out of ev­ery down cy­cle stronger,” said Michael Chia, man­ag­ing director of Kep­pel Off­shore & Marine Ltd. “Op­por­tu­ni­ties are there in ship­ping and fur­ther ocean in­dus­tries.”

“We are ad­dress­ing the ele­phant in the room,” said Wal­ter Qvam, pres­i­dent and chief ex­ec­u­tive of Kongs­berg Grup­pen. “Con­fer­ences like this are im­por­tant so we can talk to each other about which but­tons to push, which is bet­ter than try­ing to solve these prob­lems in iso­la­tion. I am what we would call a para­noid op­ti­mist about the fu­ture of the in­dus­try be­cause the big ques­tion is how long will the down­turn last. I think ship­ping will come out of this cy­cle struc­turally different than we came into it. You have to pri­ori­tise where to put your re­sources in or­der to sur­vive.”

Sturla Hen­rik­sen, chief ex­ec­u­tive of the Nor­we­gian Shipown­ers’ As­so­ci­a­tion called for per­spec­tive on the mat­ter.

“I think it’s im­por­tant to re­alise we are cap­tured by what is close to us, which for Nor­we­gians shipown­ers is the col­lapse in oil prices that has hit our in­dus­try very hard,” he said. “The rea­son is the com­po­si­tion of our fleet is different from that of the other mar­itime ma­jors. Typ­i­cally if you look at the fleet of other lead­ing ship­ping coun­tries, they have 40-80% of their fleet trans­port­ing large com­modi­ties through tankers and bulk­ers. That seg­ment makes up less than 10% of the Nor­we­gian fleet.”

“We are very heavy on the off­shore side, with about one-third of our fleet and one-half of our com­pa­nies re­lated to that sec­tor. So low oil prices are af­fect­ing us dis­pro­por­tion­ately. But lower com­mod­ity prices will be a chal­lenge for the whole in­dus­try.

“This year and next are gone for all prac­ti­cal pur­poses, with a ma­jor re­struc­tur­ing of the off­shore sec­tor ex­pected. We will see some merg­ers and oth­ers will go out of busi­ness. There is a ma­jor struc­tural over­ca­pac­ity that has to be dealt with, though we are hope­ful in a few years ac­tiv­ity will pick up again. It will take time for the rates to rise again be­cause of this over­ca­pac­ity.

“Nor­way has been a mar­itime na­tion for years so it is used to rid­ing the waves of vi­o­lent busi­ness cy­cles. But we will main­tain the same ad­van­tage Sin­ga­pore also has even in down times: high-level com­pe­tency in a very wide mar­itime sec­tor. Though Nor­way is heavy on off­shore, it has a very spe­cialised but also di­ver­si­fied fleet, which means there is an el­e­ment of hedg­ing there.”

Mr Chia said de­cid­ing on the right size for the in­dus­try can be tricky.

“It is hard to spec­u­late how long the down cy­cle will last, but what is im­por­tant is to ask what we can do,” he said. “When de­mand is weak how are you go­ing to cope? You have to be very care­ful not to cut into the bone be­cause you still need your com­pe­ten­cies to carry you into the fu­ture.”

“We have lots more ship­yards com­ing into the mar­ket as peo­ple who made money in the prop­erty mar­ket in China de­cided to in­vest in ship­yards. We have in­vestors who don’t know any­thing about drilling — we have 80 rigs in China with­out con­tracts. That is a des­per­ate mar­ket, but it is a re­al­ity.

“The mar­ket is al­ready re­struc­tur­ing and some of the spec­u­la­tors are drop­ping out. This is healthy for the mar­ket.

“Both Nor­we­gian and Sin­ga­porean com­pa­nies are niche play­ers mean­ing we have to have com­par­a­tive ad­van­tages that will al­low us to be winners in the in­dus­try. One of those ad­van­tages is tech­nol­ogy, and that should be a first pri­or­ity for these com­pa­nies.”

Mr Qvam said Kongs­berg spends 10% of its bud­get on re­search and devel­op­ment, much higher than most com­pa­nies, be­cause it is the lifeblood of the com­pany. “For us it is a holy rule to stay in­vested in tech­nol­ogy and R&D. But in such lean times, it can cer­tainly lead to in­ter­est­ing dis­cus­sions while de­ter­min­ing the bud­get,” he said.

“I do not agree with the sen­ti­ment that you need to stay put in times like this — you have to get more cre­ative. You have to get closer to your cus­tomers and part­ners to sur­vive; you have to be more ac­tive.

“The big­gest tech­no­log­i­cal op­por­tu­nity we see for the mar­itime in­dus­try is op­ti­mi­sa­tion us­ing dig­i­tal­i­sa­tion and big data an­a­lyt­ics. You need to look at this from the client’s per­spec­tive, and in our case our big­gest clients are oil and gas com­pa­nies. They have al­ready cut costs by 25-30%, but we see this in ev­ery down­turn. Then oil prices even­tu­ally go up and they ramp up every­thing again and haven’t learned any­thing.

“This time is different, as oil com­pa­nies look like they need to cut 4060% of costs. You can’t take that high of a per­cent­age out of the sup­ply chain and still sur­vive. So oil com­pa­nies need to make these leaner changes per­ma­nent. And there are new tech­no­log­i­cal so­lu­tions al­ready out there, but the oil com­pa­nies have been so con­ser­va­tive they haven’t adopted many of them yet.

“We be­lieve in­dus­trial dig­i­tal­i­sa­tion can make a big dif­fer­ence in the mar­itime sec­tor as ad­vances in con­nec­tiv­ity, soft­ware, 3D print­ing,

Newspapers in English

Newspapers from Norway

© PressReader. All rights reserved.