Ship owners contemplate switching part of their funds towards second hand vessels
Tuesday, 21 February 2012 | 00:00
The question of which is better under the current market conditions, invest in newbuildings or in second hand vessels, has taken a new twist today, with the answer proving to be more complex and difficult than ever. As usual, the first option can offer long-term benefits, but it must have dead-on timing. It’s no use taking delivery of a vessel when the peak of the market has passed, nor when the market is at its lows.
Similarly, it’s no use investing – usually with a premium fee – towards a second hand vessel, in order to take advantage of improved spot conditions, only to see those same conditions worsen in a couple of weeks.
So, ship owners have a tough riddle to answer. In a recent analysis, shipbroker Intermodal said that “you cannot trust the BDI (Baltic Dry Index) these days, as it’s no longer sure how well the index reflects precisely the full market conditions”. In his analysis, Mr. Panos Makrinos, from Intermodal mentioned that “second hand market values have continued to drop day by day these past months and are creating very attractive “shopping” opportunities for any prospective buyer who is there and very willing to acquire a secondhand vessel as soon as possible. Considering the dry bulk freight levels and what we might see in the next couple of months, most prospective buyers are presently hesitant to make a move, despite the extremely competitive prices seen, especially for the vessels built after 1990, and prefer to wait hoping for more attractive levels. On the other hand, as long as the freight rates are going down and oversupply is still an issue, ship owners are expected to expedite their decisions to scrap older vessels in order to make room in the market for the new ones coming in. This scenario will certainly affect values of the vessels in a negative way, particularly for older vessels, which if “push comes to shove” will start getting closer to their residual values eventually” said Mr. Makrinos.
He went on to state that “a good example which is able to justify our opinion regarding the present levels of secondhand values of vessels is that of the Nisshin owned Panamax bulkers ‘Washington Trader’ and ‘Goldbeam Trader’ 74K dwt built 2000 and 2001 respectively at Sasebo Japan, which were confirmed sold this week at region USD 30-31 mill enbloc to a Greek buyers who offered basis waiving inspection. The Japanese sellers were hoping to achieve region USD 30 mill each in June 2009. With that in mind, we can calculate a USD 15/16 mill discount on the final price for each ship respectively. This suggests a decline in values equal to 50% since 2009 and about 10-15% since November of last year. This recent deal fully represents the continual fall in value of secondhand vessels and gives us a sense that more such deals will be concluded at similar levels in the near future, if not at even lower levels. In conclusion, and in an attempt to answer the question we started off with, it seems to be that we have already reached more realistic price levels which better reflect the current freight markets, in essence making it a “right time” to act for perspective buyers who focus more on what price levels “work for them” and take a more long-term approach to their investment decisions” concluded Mr. Makrinos.
Meanwhile, in its latest weekly report, Piraeus-based shipbroker Golden Desinty, said that despite the BDI’s fall, it hasn’t deterred owners from buying dry units at very attractive prices, with Medium-Range (MR) tankers still being the preferable choice for secondhand investments in the tanker segment. The shipbroker’s report said that “overall, 18 vessels reported to have changed hands this week at a total invested capital in the region of US$ 177,05 mil, 2 transactions reported at an undisclosed sale price, with bulk carriers grasping 44% and tankers 33% share of the S&P activity. Notable sale in the bulk carrier segment, the sale of mini cape vessel of 106,660dwt built China 2011 for $32mil and in the tanker segment the enbloc sale of three handymax units of 40,158dwt built 2005/2003 for total $54 mil. In terms of the reported number of transactions, the S&P activity is up by 200% from previous week activity, and up by 80% comparable with previous year’s weekly S&P activity when 10 vessels induced buyers’ interest at a total invested capital of about $386,3 million with tankers holding 40% of the total volume of S&P activity. In terms of invested capital, the bulk carrier and tanker sector attracted 44% and 41% respectively of the total amount of money invested with the secondhand purchasing momentum being 100% and 500% higher in the bulk carrier and tanker segment respectively from previous weekly levels” concluded Golden Destiny.
Nikos Roussanoglou, Hellenic Shipping News Worldwide