Increasing demand but falling revenues for salvors
The International Salvage Union (ISU) has provided statistics for 2016 reporting increasing numbers of services but falling revenues adding to commercial pressures for salvors.
The point is made by John Witte, ISU president who comments: "These numbers show a contradiction. It would be expected that a 47% drop in total revenue would have been brought about by a reduction in the number of cases. However, the total number of cases, both ‘dry salvage’ and wreck removal, increased from 276 in 2015 to 437 in 2016."
Gross revenue from ISU members in 2016 from all activities fell to US$ 380m from US$ 717m in 2015 (for income received in the given year but from operations from a preceding year). The total number of ‘dry salvage’ services in 2016 was 306, the highest since 1999 comparing to 212 services in 2015.
Wreck removal is considered a growth area with an upward trend during the past decade, however during 2016, revenue from wreck removal activity fell to US$ 172m from US$ 397 in 2015 (a fall of 57%). The count of wreck removal jobs was 131 in 2016 compared with 64 in 2015.
The salvage industry strives to highlight the advantages for all involved in employing Lloyd’s Open Form (LOF) contract agreements when the victims of mishap are under pressure to ensure a fair deal is struck. Its concern is illustrated with 2016 recording the lowest revenue from LOF cases since 2003, a continuing downward trend. Average revenue from LOF cases (including SCOPIC revenue) was US$ 3.9m, a 40% drop from 2015.
The period also saw a 23% drop (from 2015) in revenue from operations conducted under contracts other than LOF with a figure of just US$ 277,000 as the average revenue from such contracts. A further example of the contradiction Mr Witte speaks of is where revenue from the SCOPIC clause in LOF cases decreased significantly to US$ 64m from US$ 139m in 2015 but the total salved values (ship and cargo) in LOF cases rose from US$ 638m in 2015 to US$ 845m in 2016.
Commenting further Mr Witte said: ‘Clearly, therefore, the average revenue from all cases declined. It may be due to fierce competition forcing salvors to undertake cases for much lower returns. And general commercial pressures across shipping could be squeezing the margins.
"These statistics again show the variability of our industry and the fluctuations in the sources of revenue. But it seems there has been a fundamental shift downwards.
"Despite the pressure on salvors’ revenue, members of the ISU continue to stand ready to provide vital services that benefit shipowners and insurers by mitigating loss. And a sustainable salvage sector is very much in the interests of the shipping industry."
By Peter Barker
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