SFL Corporation Ltd. (SFL): 5 FORCES Analysis [Nov-2025 Updated]

You're digging into SFL Corporation Ltd.'s competitive moat as of late 2025, and honestly, the story is one of balancing massive stability against relentless industry pressure. While that $\mathbf{\$4.0 \text{ billion}}$ fixed-rate charter backlog and a $\mathbf{6.5 \text{ year}}$ weighted remaining charter term suggest customers have little say, the flip side is that shipyards and specialized tech suppliers hold significant sway, especially with SFL committing $\mathbf{\$100 \text{ million}}$ since 2023 to LNG retrofits and still facing $\mathbf{\$850 \text{ million}}$ in capital expenditure for new container ships. That Q1 2025 $\mathbf{\$31.9 \text{ million}}$ net loss shows the heat in the older dry bulk segments, even as they smartly offloaded older tonnage for over $\mathbf{\$200 \text{ million}}$ in Q2 2025; let's break down exactly how these five forces-from supplier leverage to the threat of new entrants-shape SFL's actual competitive footing right now.

SFL Corporation Ltd. (SFL) - Porter's Five Forces: Bargaining power of suppliers

You're assessing SFL Corporation Ltd.'s position against its key suppliers, which is critical because the cost and availability of physical assets-ships and the technology that powers them-directly impact your long-term cash flow visibility. The power of these suppliers is a major factor in how SFL manages its capital deployment.

High capital expenditure for new vessels, like the remaining $850 million for five container ships, favors shipyards.

When SFL Corporation Ltd. commits to major asset acquisition, the shipyards building those assets gain leverage. SFL Corporation Ltd. has five 16,800 TEU container vessels under construction, scheduled for delivery in 2028. The remaining capital expenditures for these newbuilds stand at approximately $850 million. This substantial, multi-year commitment means shipyards hold significant pricing power over SFL Corporation Ltd. for these specific, high-value contracts, as SFL Corporation Ltd. needs these yards to execute its fleet renewal strategy.

Specialized engine and technology suppliers hold power due to the shift to LNG dual-fuel and retrofitting, a $100 million investment since 2023.

The push for lower carbon footprints gives specialized technology providers leverage. SFL Corporation Ltd. has been actively investing in assets with LNG dual-fuel propulsion. Since 2023, SFL Corporation Ltd. has invested nearly $100 million in fuel efficiency and cargo optimization upgrades across its existing fleet. Suppliers of these advanced, dual-fuel engine systems and associated retrofitting technology are not easily interchangeable, meaning SFL Corporation Ltd. must negotiate terms that reflect the specialized nature of the input, even as it seeks to deploy these modern assets on long-term charters.

Here's a quick look at SFL Corporation Ltd.'s recent financial commitments and liquidity, which underpins its ability to manage supplier demands:

Vessel financing is a major input, but SFL's access to credit facilities for newbuildings mitigates this pressure.

Financing is a massive input cost, but SFL Corporation Ltd.'s established relationships help counter the power of pure capital providers. The $850 million remaining for the container newbuilds is expected to be financed through pre- and post-delivery credit facilities. While the need for external capital is high, SFL Corporation Ltd.'s ability to secure these facilities, alongside having $320 million in total liquidity as of Q3 2025, means it is not entirely beholden to a single financing source at any given moment. Still, any tightening in the broader credit markets could immediately increase the bargaining power of banks and bondholders.

Crew and operational management services are commoditized, keeping their power low in time charter agreements.

For day-to-day operations, SFL Corporation Ltd. benefits from the commoditized nature of many services, especially when vessels are locked into long-term contracts. The company's strategy heavily relies on long-term time charters, which shifts many operational risks and costs to the charterer. For instance, in Q2 2025, 95% of charter revenues came from time charter contracts, as opposed to bareboats or dry leases. This structure inherently reduces the direct bargaining power of crew providers and third-party operational managers over SFL Corporation Ltd. because the charterer often assumes responsibility for these day-to-day expenses.

The supplier landscape for SFL Corporation Ltd. is characterized by high leverage in specific, high-tech areas:

• Shipyards command power due to $850 million in committed newbuild CapEx.
• Technology suppliers gain leverage from the $100 million spent on efficiency upgrades.
• Financiers' power is checked by $320 million in total liquidity.
• Operational managers have low power due to 95% reliance on time charters.

Finance: draft 13-week cash view by Friday.

SFL Corporation Ltd. (SFL) - Porter's Five Forces: Bargaining power of customers

You're looking at SFL Corporation Ltd.'s customer power, and honestly, for the core business, it looks pretty constrained. The main reason is the sheer volume of revenue already locked in. As of the third quarter of 2025, SFL Corporation Ltd.'s fixed-rate charter backlog stood at approximately \$4.0 billion. That's a massive amount of revenue visibility that keeps the lights on and supports that consistent dividend history-it's their 87th consecutive quarterly dividend declared at \$0.20 per share. This long-term commitment inherently limits how much a customer can push on pricing or terms for the existing fleet base.

Still, you can't ignore the giants. Even with a strong backlog, large, global customers like Maersk definitely have leverage when negotiating new deals or extensions. We saw this play out when SFL Corporation Ltd. agreed to five-year time charter extensions for three of its 9,500 TEU container vessels with Maersk. That deal, which locks in revenue from 2026 through 2031, added approximately \$225 million to the contracted backlog. It shows that while the existing revenue stream is secure, securing future revenue from top-tier operators requires cooperation, like agreeing to upgrade those vessels with advanced cargo handling and fuel efficiency features.

Here's a quick look at the numbers underpinning that revenue stability:

The duration of these contracts is a major factor reducing short-term customer influence. The weighted remaining charter term across the portfolio was 6.5 years as of Q3 2025. To be fair, the overall weighted average tenor for owned and partially owned vessels on long-term fixed charters is close to 7 years. That long runway means customers can't easily walk away or demand significant rate concessions without breaking a long-term agreement, which is costly for them too.

Also, the quality of the customer base itself dampens bargaining power. SFL Corporation Ltd. has strategically positioned its assets with creditworthy counterparties. We know that two-thirds of that \$4.0 billion fixed-rate charter backlog is contracted to customers with an investment-grade credit rating. This is a strong signal; it reduces SFL Corporation Ltd.'s credit risk significantly, which is great for stability, but it also means the customer base is generally composed of the industry's most established players who have the scale to negotiate terms, as seen with Maersk.

Here are the key takeaways on customer quality and commitment:

• The \$4.0 billion backlog provides strong cash flow visibility.
• Two-thirds of the backlog is with investment-grade counterparties.
• The 6.5-year weighted remaining term locks in revenue streams.
• Major customers like Maersk secure leverage through large, multi-year extensions, like the \$225 million deal.

SFL Corporation Ltd. (SFL) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for SFL Corporation Ltd. (SFL), and honestly, it's a tough spot. The seaborne transportation industry is inherently cyclical and volatile, meaning rivalry is always high because rates can swing wildly. That volatility definitely showed up in the first quarter of 2025.

SFL Corporation Ltd. managed to report a net loss of \$31.9 million in Q1 2025, which works out to \$0.24 per share. Management pointed to impairments on older dry bulk vessels that were trading in the spot market as a major factor. When you have assets exposed to the spot market, you feel the pressure from rivals immediately, and that pressure led to that quarterly loss, even while the company held its dividend steady at \$0.27 per share for that period.

What helps SFL Corporation Ltd. manage this intense rivalry, compared to peers focused on just one area, is its diversified fleet. They aren't just in one segment; they operate across several key maritime sectors. This spread helps cushion the blow when one specific market segment, like older spot-exposed dry bulk, struggles.

Here's a quick look at how SFL Corporation Ltd.'s operations are segmented, based on recent revenue and EBITDA breakdowns, which shows that diversification in action:

To stay competitive against modern tonnage-ships that are more fuel-efficient and meet stricter environmental rules-SFL Corporation Ltd. has to keep renewing its fleet. This is a direct action taken to combat rivals operating newer, cheaper-to-run vessels. This renewal strategy is capital-intensive, but necessary. You saw this play out in Q2 2025 when the company executed continuous fleet renewal by selling older dry bulk and container vessels for an aggregate amount of more than \$200 million.

Still, the company is locking in long-term, high-quality business to secure future cash flow, which is the best defense against spot market volatility. For example, they secured a five-year time charter extension with Maersk for three 9,500 TEU container vessels in Q2 2025, adding approximately \$225 million to the backlog starting in 2026. That kind of secured revenue, layered on top of the existing fixed-rate charter backlog of about \$4.2 billion, is what lets them weather the competitive storms. The dividend adjustment from \$0.27 per share in Q1 to \$0.20 per share in Q2 reflects the short-term cash flow impact from these sales, even as they position for long-term strength.

The pressure is real, but SFL Corporation Ltd. is actively trading out older, less competitive assets for secured, long-term contracts. That's the game right now.

SFL Corporation Ltd. (SFL) - Porter's Five Forces: Threat of substitutes

You're analyzing the competitive landscape for SFL Corporation Ltd. as of late 2025, and the threat of substitutes for its core long-haul sea freight business looks relatively low, but the energy segment presents a clear exception. Honestly, for moving massive volumes over long distances, nothing beats the economics of the ocean. Rail and air cargo simply can't compete on the sheer scale SFL manages.

For context, as we look at the market dynamics in 2025, transporting a standard shipping container from China to the U.S. via sea freight might cost as little as $1,200. Compare that to air freight for the same shipment, which could easily top $5,000 depending on weight. Air freight, while fast, is often four to six times more expensive than sea freight. Rail offers a middle ground but lacks the global reach SFL specializes in.

The high utilization across SFL Corporation Ltd.'s core shipping fleets in Q3 2025 confirms this lack of viable, cost-effective substitutes for its primary business lines. Look at the numbers from the third quarter of 2025:

The long-term threat from a global shift away from oil is real, especially for the tanker fleet, but SFL Corporation Ltd. is clearly moving to mitigate this risk through proactive capital deployment. The company has invested nearly $100 million in fuel efficiency and cargo optimization upgrades since 2023. These initiatives are already paying off, contributing approximately $1.2 billion to the fixed-rate charter backlog. This focus on efficiency is a direct countermeasure to future environmental pressures.

Furthermore, SFL Corporation Ltd. is locking in long-term, non-oil-dependent capacity with its container segment expansion. The company is progressing with the construction of five 16,800 teu container vessels, all scheduled for delivery in 2028. These newbuilds carry remaining capital expenditures of approximately $850 million, which are expected to be financed through credit facilities. These vessels are chartered out on ten year time charters commencing immediately upon delivery, securing future revenue visibility.

The drilling rig segment, however, faces a much higher threat of substitution or, more accurately, a threat of non-employment due to market uncertainty. The energy fleet utilization was only 50 per cent in Q3 2025, which is significantly lower than the other segments.

The evidence for this high threat is the status of the legacy drilling rig Hercules. It remains the only asset in the fleet not on profitable charter, specifically being warm-stacked pending new drilling contracts. This idle status directly impacted the Q3 2025 results, which saw net income of $8.6 million or $0.07 per share. The CEO noted optimism about securing new employment for Hercules next year, but its current state highlights the vulnerability of this specific asset class to market shifts and the availability of newer, more competitive drilling solutions.

Finance: draft 13-week cash view by Friday.

SFL Corporation Ltd. (SFL) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers new competitors face when trying to break into the maritime infrastructure space SFL Corporation Ltd. operates in. Honestly, the hurdles are substantial, primarily because of the sheer amount of money required to even start.

The barrier to entry is high due to the massive capital required for new vessels. For SFL Corporation Ltd., the remaining capital expenditure for its current newbuilding program, which involves five 16,800 TEU container vessels scheduled for delivery in 2028, stands at approximately $850 million. This figure alone represents a significant initial hurdle for any newcomer. To put that into perspective against the market, a new ultra-large container vessel in 2025 can command a price near $210 million for a 20,000 TEU capacity ship.

Securing long-term charters with investment-grade counterparties is difficult for new players without an established track record. SFL Corporation Ltd. benefits from a portfolio where approximately 66% of its fixed-rate charter backlog is with customers rated as investment grade as of June 30, 2025. New entrants simply don't have the operating history to convince these top-tier charterers to commit for the long haul.

New environmental regulations and the need for fuel-efficient, modern vessels increase the initial investment cost significantly. The industry is rapidly shifting toward cleaner technology. For instance, one recent large electric container ship project was valued at $270 million. Furthermore, building vessels with zero-emission technology, like LNG dual-fuel engines, can make the initial capital expenditure 1.8 to 2.7 times more expensive than a conventional fossil fuel vessel, depending on the route and technology chosen. This regulatory push means new entrants must finance not just a ship, but a state-of-the-art, compliant asset.

Access to the necessary scale of charter backlog for stability is a significant hurdle. SFL Corporation Ltd. maintains a robust, visible revenue stream backed by its contracted revenue pipeline. As of Q3 2025, the company's fixed-rate charter backlog was approximately $4.0 billion. This level of contracted revenue provides a financial cushion that a new, unproven entity cannot easily replicate, which is key for securing favorable debt financing.

Here's a quick look at the capital intensity and counterparty quality:

The financial commitment required to compete effectively is clear. New entrants must overcome these capital and relationship demands:

• Secure financing for vessel costs exceeding $180 million for large units.
• Demonstrate a track record to secure charters with investment-grade counterparties.
• Absorb the higher initial cost of dual-fuel or zero-emission technology.
• Match the stability provided by a multi-billion dollar charter backlog, such as SFL Corporation Ltd.'s $4.0 billion.

Finance: draft 13-week cash view by Friday.