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Norwegian shipowners project thousands of layoffs in 2016

In 2016, more employees at Norwegian carriers will lose their jobs, according to projections from the Norwegian Shipowners' Association. This year looks like it will be an overall tough year for the shipowners, with 60 percent expecting weaker operating results than in 2015.

Photo: PR

Norwegian shipowners are not done trimming their businesses, even though significant cuts were made in 2015 in an effort to survive the crisis. But it looks as though these cutbacks were not enough, and in general the shipowners have a dark outlook for the coming year, according to the annual Maritime Outlook report from the Norwegian Shipowners' Association.

The employees at these carriers face more layoffs, on top of last year when upwards of 7,300 workers in the Norwegian cluster lost their jobs. At the companies which provide service to the offshore sector, 3,150 positions vanished in 2015.

"A combined number of 4,000-4,500 layoffs and terminations are anticipated in 2016," the association writes in the report, which is based on the carriers' own estimates.

In 2015, the contractors to the offshore sector were behind 50 percent of the cuts. In the coming year, this will presumably come to 60 percent, while also deep sea shipowners expect to increase the number of layoffs in 2016 compared to last year.

Photo: Norges Rederiforbund
Photo: Norges Rederiforbund

Source: Norwegian Shipowners' Association

Furthermore, there are indications that not only the permanent positions are at stake. A total of 60 carriers have participated in the survey among members, and of these, 55 percent currently maintain trainee positions. This concerns offshore and deep sea carriers in particular. Today, there are about 1,900 training positions among the Norwegian carriers, but during 2016, about 200 of these positions could disappear, the shipowners project.

The statements from the Norwegian shipowner cluster are not very optimistic at all. As early as last year, the shipowners had a negative outlook for their own profitability, and for 2016, the projections are even more negative. Approximately 60 percent of the shipowners believe that their operating result will be weaker in 2016. When the survey was conducted in 2014, the number was only 8 percent representing shipowners with a negative view of profitability, the association notes. So it did not take the shipowners a long time to change their projections for the upcoming year. 23 percent of the carriers project a strengthened result for 2016.

"With the exception of short sea shipping, all shipowning segments are less optimistic regarding improved profitability for 2016 than they were for 2015. Deep sea shipowners were the most optimistic group of the four in 2015, but the percentage expecting a stronger bottom line this year is only half that of last year, down from 60 to just over 30 per cent," the association states in the report.

85 percent of the shipowners in offshore service think that profitability will decline, while only five percent project an improved result.

Photo: Norges Rederiforbund
Photo: Norges Rederiforbund

Source: Norwegian Shipowners' Association

Limited access to capital

And adding to the worries of shipowners, things do not look bright in the realm of financing. In recent years, it has grown more difficult for the carriers to obtain access to capital. In 2015, 20 percent experienced the availability as good, while only 15 percent assess good availability in 2016.

"Today one in three shipowners view capital availability as very tight. Almost no shipowners anticipate improved capital availability, and 55 per cent expect the situation to worsen," the shipowners write in the report.

The major shipping banks such as Nordea and DNB are focused on managing their portfolio with existing loans, explains Sturla Henriksen, CEO of the Norwegian Shipowners' Association, tells Norwegian media TDN Finans.

"The main subject is now refinancing of loans for carriers having trouble with the cash flow. The availability of capital, as least for companies in offshore, is about the possibility of changing the payment structure, so that the cash flow is under the least amount of stress in this difficult market situation," he says.

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For carriers with foreign owners, the scenario is slightly different. They assess the capital availability to be better than the Norwegian carriers do. The expectations for the future are not that different however. The difference between listed carriers and not-listed carriers is marginal, where the listed carriers are slightly more pessimistic.

"Two years ago, the situation was notably different. Then, independent Norwegian shipowners experienced access to capital as being far tighter than did shipping companies owned by Norwegian or foreign-controlled corporations. The reason given for this was that these companies were small and lacked the credit rating that generally accompanies ownership by corporations with more financial muscle," the shipowners' association writes in the report.

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