PETALING JAYA: The offshore support vessel (OSV) market continues to face chronic under-investment, as the global fleet ages progressively each year.
Citing data from global maritime consultancy Clarksons, Kenanga Research said 80% of the global OSV fleet will be over 20 years old by 2035, indicating that a significant portion of vessels may no longer be in optimal working condition if substantial reinvestment in fleet renewal does not occur.
“We believe shipowners are still having fresh memories of the previous downcycle that began in 2015, when speculative overbuilding led to a prolonged and painful decline in daily charter rates, triggering multiple bankruptcies, particularly among companies with highly leveraged balance sheets,” the research house said in a report.
It said this had instilled deep conservatism among OSV owners, who remain hesitant to commit to new builds despite average charter rates having returned to near 2014 peak levels since 2023.
For context, Malaysia’s vessel fleet, is now averaging at 12 to 15 years due to minimal new building since 2016, which is still within the optimal age but would turn sub-optimal in a few years time, the research house said.
It said this is a sign reflecting chronic under-investment in the subsector for the last decade which would eventually cause an oversized squeeze on vessel supply in the longer run, potentially nearing 2030 as average fleet ages inch closer to 20 years.
Kenanga Research said while there were some new building emerging in the Middle Eastern market, they remain insignificant relative to the global OSV fleet.
“Most classes including anchor handling tugs and supply (AHTS) vessels and others continue to see minimal building activity, with only platform supply vessels (PSVs) experiencing a modest increase in upcoming capacity,” it said.
Importantly, the majority of the new builds are already chartered, primarily to the Middle East and China markets, meaning none are expected to enter the Asia Pacific market, Kenanga Research said.
Within the PSV segment, 42% of new builds are contracted to Petrobras, supporting the anticipated ramp-up in floating production storage and offloading or FPSO installations in Brazil over the coming years.
Additionally, according to Clarksons, the number of AHTS vessels in laid up condition, which could potentially be reactivated to supplement global OSV supply, has declined to all-time lows in Asia Pacific since 2020.
This trend underscores a chronic tightening in the AHTS supply market, which will render the market structurally tight in the coming years if activity recovers, Kenanga Research said.
The research house reckoned that there are multiple ways that Malaysia can improve its OSV financing market to better facilitate the incoming fleet renewal cycle, if Malaysia does not want to be overtaken by other countries in the OSV market in the medium to long term.
Among the potential solutions could be institutional integration.
It noted in Singapore, the Maritime and Port Authority (MPA), Monetary Authority of Singapore and Enterprise Singapore work in sync whereas in Malaysia, parties work in a more fragmented fashion.
“We believe that higher integration in terms of policy making and operations could result in more effective and smoother financing for OSV owners in the long run,” the research house said.
It added that Malaysia could develop more public-private maritime credit platforms to supplement state lenders and enable the Export Credit Agency direct access so that Malaysian borrowers can deal directly with foreign lenders instead of going through local third parties.
The industry could also explore more chart-based vessel financing programmes to be underwritten by development financial institutions and banks, it said.
