Next CEO of DNV GL warns short-term outlook remains grim

Next CEO of DNV GL warns short-term outlook remains grim

Oslo: There’ll be no upswing in newbuild ordering until 2017 at the earliest and even then it will not be to the same levels seen in the past 10 years, suggests the incoming new CEO of classification society DNV-GL. At his first press conference with the international media since Friday’s new CEO announcement, Remi Eriksen gave his predictions on the market at the start of Nor-Shipping week in Oslo.

Eriksen, who takes over from Henrik Madsen on August 1, said in the short-term shipping would continue to be plagued by overcapacity, low rates, fierce competition and greater amounts of regulations.

The oil and gas sector was at a crossroads, he said, suggesting that for many in the OSV sphere, the markets will get worse before they improve sometime towards the end of 2016, while rig rates will remain depressed through to 2018.

Eriksen was speaking just ahead of Tor Svensen, the CEO of DNV GL, who gave an update on DNV’s 2012-published forecast on how shipping would look in 2020.

Svensen said there had been a number of trends that had come on stronger than the company had predicted three years ago, while others had not taken off in such a strong manner as expected.

Connectivity, so called ‘Big Data’, the use of scrubber and technology and hybrid designs had all come on much quicker than DNV had predicted. The adoption of LNG as a ship fuel, something DNV had been especially bullish on back in 2012, had not materialised as strong as the class society had initially expected. Svensen reckoned there’d be up to 600 ships using LNG as a fuel by 2020, a sharp decline from an initial prediction of 1,000 ships three years ago, a figure that attracted much media interest at the time. Svensen cited slow infrastructure build-up, high capital costs and low oil prices as reasons for this lower figure.

Svensen warned about the likely rise of cyber attacks on shipping as vessels become ever more connected to software and the internet.

He also said that the chances of oil breaking through the $100 a barrel mark anytime before 2020 were negligible. It would take a long time for the price of oil to return to $80 to $85, he predicted, saying: “There’s just too much oil out there.”

In terms of general shipping predictions, Svensen concluded by suggesting there’d be more consolidation in the industry and that bigger units would derive greater economies of scale, but that the cyclical nature of shipping would continue.

 

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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