Layoffs in Singapore have hit their highest levels since the global financial crisis, highlighting the adverse impact of sustained low oil prices on the city-state.
A big chunk of the losses have come in marine and offshore industries, areas where Singapore has long dominated. Singapore is a global trading hub for physical oil and 70 per cent of the world’s jack-up rigs are built there.
Now that oil prices have slumped to multi-year lows, both intentional and local companies are announcing hefty layoffs.
Among global companies hit by the oil crash that have announced job cuts, is Oslo-listed BW Offshore, which builds and operates ships that can produce and store oil offshore.
Singapore rigbuilders Keppel Corp. and Sembcorp Marine have collectively cut some 10,000 jobs in the last year.
This comes as Singapore Exchange-listed oil and gas companies reported a wave of impairments and provisions that followed rig delivery deferments and cancellations.
Moody’s in late-February downgraded the debt ratings of several key drillers, such as Transocean and Ensco, which may hit rig builders in Singapore. including Keppel Corp., Sembcorp Industries and Sembcorp Marine as the drillers’ access to funds will likely tighten, triggering rig orders deferments and cancellations, said Singapore’s DBS bank in early March.
Order books are also likely to decline this year.
“The yards are the last in line in terms of cash flow trickle-through; if vessel and rig owners continue to under-utilize their assets, order wins are likely to remain low,” wrote DBS analysts in a note on March 15.
The mood in general is still cautious. Even though oil prices have gained recently, they have not traded at a level that gives confidence to the market, Andy Hendricks, contract driller Patterson-UTI Energy CEO told CNBC’s Power Lunch on Monday.
“As an industry, we (don’t) really know what that number is yet, what price WTI will settle in and inspire a little bit of confidence,” he said.
DBS analysts said the situation for rig builders is unlikely to improve unless oil rebounds to $60 a barrel-about 40 per cent higher than current levels around $42 a barrel.
The US rig count has fallen by two-thirds by over the past year to its lowest since 2009, reported Reuters this week.
To weather the energy downturn, some companies are looking to diversify their businesses.
Singapore’s Keppel Corp., for instance, will likely deploy more funds to its property segment as offshore and marine segment flounders, said OCBC Investment Research’s Low Pei Han. The company’s other businesses includes waste-to-energy, data and logistics.
Singapore’s troubles go beyond oil and gas as jobs in the financial and technology sectors were also hurt, with global banks Barclays and Standard Chartered, as well as Japanese online retailer Rakuten and US internet company Yahoo also axing staff.
Forecasters last week slashed their growth expectations for Southeast Asia’s leading financial hub ahead of Thursday’s budget.
Private economists polled by the Monetary Authority of Singapore (MAS), the city-state’s central bank, see gross domestic product (GDP) growth at 1.9 per cent this year, down from a previous forecast of 2.2 per cent in December and below last year’s reading of 2 per cent.
Last year marked the weakest pace of growth since the economy contracted 1.3 per cent in 2009, so if GDP growth does slip below 2 per cent this year, it will mark a new seven-year low.
