Marine Link
Tuesday, March 19, 2024

The Year In Review

Consolidation — across the full realm of the maritime industry — could reasonably be called the major theme of 1998, and it appears this trend will continue well into the new millennium. While it is impossible to provide a catch-all reason for why vessel builders, vessel owners and marine equipment suppliers are numbering fewer but larger, a strong case can be made for the ever evolving globalization of business. This is not, of course, unique to marine companies, as soda manufacturers, for example, face many of the same operational constraints and market share concerns as makers of bowthrusters. Simply put, price pressures and politics make it increasingly prohibitive for the "little guy" to profit.

A prime example of this trend was seen with the recent announcement that Mitsui O.S.K. Lines Ltd. and Navix Line Ltd. will merge next April, effectively creating one of Japan's biggest shipping firms with revenues comparable to industry leader Nippon Yusen KK. The two companies were reportedly driven to merge in a bid to survive the increasingly competitive global shipping industry. The deals announced or consummated in 1998 are far too numerous to list here, but some recent notable players include General Dynamics, headquartered in Falls Church, Va., which officially added San Diego-based NASSCO to its vast arsenal of shipbuilding and general defense holdings.

But while mega-deals are in vogue, it is worthy to note that size doesn't always matter. Kvaerner ASA, one of the world's largest engineering and construction firms, had a rough year digesting the sum of its previous year's additions. The company's steady march down the stock market scales eventually led to the ousting of its chairman and CEO. But throughout, it is interesting to note, the company's shipbuilding arm continued making its mark on the global shipbuilding scene by delivering quality, high-value tonnage, and with the development of | advanced shipbuilding facilities, ] notably in Philadelphia.

Illustrated to the right is a | smattering of data and statistics 3 designed to give the broad overview of the year that is almost J past. Perhaps most revealing is the correlation (though not exact- j ly) between the curves on the Oil Prices and Rig Utilization charts. No other theme has dominated the headlines this year more than the stagnation of oil prices at 10 year lows. The offshore oil production business was enjoying a raucous three year run before a host of factors — including the Asian financial crisis — conspired to slow demand and depress prices. Despite the concerted and best efforts of OPEC members and other major oil producing nations to trim output and lessen the glut of product on the market, the price though temporarily buoyed — has remained mired in the $13/barrel region.

The inability to prop up the price of oil has a domino effect across the maritime market, and affects a wide spectrum of marine operators, builders and suppliers. It is impossible to accurately predict the future direction of the oil markets, but it is safe to assume that eventually, pricing will rebound.

While a full fledged panic is far away, there have been some signs of late that oil woes will impact marine companies directly in the coming year, most notably as oil majors have uniformly announced plans to trim exploration and production spending. But while cuts will undoubtedly hurt, it is interesting to note that interest and activity in the discovery and recovery of resources in deepwater fields remains economically attractive and a potential area of short term growth. Tax incentives and technology are beckoning oil companies to proceed in increasingly deeper waters, and a true test of the industry's strength should show itself during the next Gulf of Mexico lease sale, which has been tentatively scheduled by the MMS for next March

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