Seatrium (SGX: S51) shares are down 3% today. Which makes it a 16% decline over the month for S51 shares. There is no specific news driving this price change either. This isn’t like the past, when the then Sembcorp Marine (which then became Seatrium) was hit with those historic claims of bribery in Brazil. This does just appear to be people less confident in future prospects.
There are positives for Seatrium: “Estaleiro Jurong Aracruz (EJA), a wholly-owned subsidiary of Seatrium Limited (Seatrium), clinched a US$500m facility from Standard Chartered Bank (Singapore) Limited. According to Seatrium, the facility includes an innovative sustainability-linked conversion option aligned to the Sustainability-Linked Loan Principles. “This will support Seatrium in achieving its ESG targets over time through adjustments to the loan characteristics upon conversion,” Seatrium said in a bourse filing.”
OK, there’s a certain amusement in a company which builds offshore oil and gas platforms - and services them - going big on ESG principles but it that’s the current investment fad then so be it.
Seatrium share price from Google Finance
As with the ex-parent company Sembcorp, the market just generally seems to have a downer on the Seatrium shares at present. As to why, well, that can only be speculation. Our such speculation is that the shipbuilding, marine and offshore industries are horribly over-supplied. Far too many governments think that it’s a matter of national pride to have companies competing in this space. This is especially true of shipbuilding. Therefore there is considerable subsidy to the sector.
What that, in turn, means is that no one gets to make any money. If all prices are depressed by national subsidies then the unsubsidised can’t make the margins necessary to pay their own cost of capital. Eventually this will pass, as it always has done with any other level of technology. At some point we work out that OK, this is a thing best done by others and our own domestic workers should go do something else. But as the global steel industry shows this can take a long time. Unfortunately for those unsubsidised marine engineering companies that have to try surviving until then.
