OSV yards urged to move away from build-to-stock model: CitibankOSV yards urged to move away from build-to-stock model: Citibank

James Tong, managing director, regional head of shipping & logistics at Citibank, said that the severe oversupply of OSVs is partly due to the build-to-stock business model, employed by a lot of Chinese shipyards in particular.

The build-to-stock business model calls for yards to construct an OSV first without securing a sale, betting on quick turnaround when operators need the vessel on short notice. But the present low oil price climate has resulted in low demand for OSVs, and the oversupply situation has been magnified by the excess stock left over from the build-to-stock units.

“OSV builders should change their mindset away from building the vessels before securing an order. I think now is also the right time for consolidation (of OSV yards), especially when we are also talking about te use of more alternative energy such as wind, nuclear and solar,” Tong told delegates at the Capital Link China Shipping Forum held in Shanghai on Tuesday.

“Furthermore, we need to think about what the energy demand sector landscape would be like 10 to 20 years down the road, and how would this affect the OSV shipyards,” Tong said.

Globally, observers are talking about an oversupply of some 600-700 units of PSVs, and 800 AHTS vessels, and newbuilding OSVs yet to be delivered from Chinese yards are easily in the range of a couple hundred units.