Confident that shipping today offers plenty investment opportunities, appears Mr. Athanasios Samios, Managing Director of Samios Shipping Company, a 34 year old dry bulk company, that is now on the market for any potential investment,
particularly in sectors like the tanker market or even passenger shipping. In his interview to Hellenic Shipping News, Mr. Samios is positive that the dry bulk market hasn't yet reached its peak, at least for the near future, describing a frenetic demand in the market, almost for any kind of vessel and route.
First of all, could you provide us with a brief company profile of Samios Shipping Company?
We are basically into managing vessels in the dry bulk market for the last 34 years. During the past couple of years, a large part of our fleet was sold due to the high market prices. So now we are active in the market, we are observing the situation and are confident that we shall soon seize up any potential investment opportunity that will arise. This doesn't mean of course that we're investigating only the dry bulk market. We are strategically monitoring other segments of the market as well, such as the wet sector (tankers), but also passenger shipping.
Today are there any ships left under operation from Samios Shipping?
The company sold 12 vessels in the last three years and today we have three vessels operating.
I must say that passenger shipping as an investment opportunity strikes me with a bit of a surprise, given the fact that the ones active in the market are constantly complaining about the problems faced, while also the public's opinion about the services provided isn't the best possible.
Definitely, there's room for improvement. I believe there are better days ahead for this sector. But besides that, the fact that the services provided need to be improved is viewed by us as a challenge.
Are you considering entering the market independently or with a business partner, probably from abroad?
At first we shall move independently, but in the future maybe a business or a strategic partner will be necessary. That's because only large schemes shall survive in the sector in the following years.
Another interesting issue is the tanker business that you mentioned earlier. The market hasn't followed the boom observed in the dry bulk sector. Therefore, maybe more business opportunities will be observed. Is that correct?
I'd say that the tanker side of the market witnessed a boom earlier than the one occurring nowadays in the dry bulk market. But what we've seen in all three main segments of the market, regardless of the freight rates and the levels they are, we are in a period never before witnessed in shipping, with very high return levels and values of vessels. In the tanker market, where a fall has been witnessed in the market, the very high liquidity has kept vessel prices high. Only if tanker rates keep falling, there's a chance that vessel prices will also fall.
Let's go back to the dry bulk market. In such a booming environment with record breaking rates and very high asset prices, are there any investment opportunities, given the fact that the market might be reaching its peak?
Well, the decision lies in the hands of the investor. He has to calculate the risk and take it or leave it. Of course, the potential is there, mainly because of the very high demand for a shipowner to time-charter his vessel for a long period of time, thus, securing income inflows for a given period. Of course, others prefer the spot market, which traditionally offers higher returns than time-charter. But, what might happen in between, in terms of the market conditions and the ship's value at the end of the time-charter period, is something to be examined by every ship owner and accordingly make his decision.
Which are the factors that a ship owner has to take into account, in order to make this decision, i.e. time-charter Vs. spot, especially in today's conditions?
Well, there are lots of factors that determine such a decision, one of which being the price that a given vessel has been acquired. For instance, if a ship has been bought several years back at a low price and is debt-free, it's easy to operate in the spot market with higher returns and risk, because the ship has already paid off the investment risk. Exactly the same mentality applies to the case of a large fleet, where some of the vessels are under time-charter contracts and some others operate in the spot market. But the rule is for a wise ship owner to charter his ship, depending on his cash needs. Usually, if a vessel has been bought at a high price and demands large amounts of money to be paid off in the near future, it is time-chartered in order to minimize any potential risk. The market is booming now, but can just as easy retreat to lower levels.
What has triggered today's booming freight market? Is the so-called "China Effect" enough to justify this reality?
There are lots of factors. During the past 20 years or so, we had a lack of investment not only in the core shipping business, but also in infrastructure. The increased demand from China and its "satellite", in conjunction with the increase of world trade, the price hike of commodities, which of course has also to do with the decrease of the U.S. dollar's value, have gradually, from 2003 and forward, offered a large boost in all shipping segments. With regards to the dry bulk market, some other factors have influenced the market as well, such as the large congestion witnessed in key ports, like Newcastle in Australia, where the waiting days reached almost 70 for large capesizes. So, we have an artificial reason for limiting supply of vessels, since ships are used as floating storage rooms, instead of hauling and carrying cargoes. This has resulted in higher demand, which, according to analysts, isn't going to fade away, at least for the near future.
Which were the drivers behind the fall in tanker rates?
I think it was due to an imbalance between demand and supply of vessels. We had a strong orderbook in the previous years, which now is being put in water. I recently came across a chart with an interesting coincidence. When we see a peak in tanker newbuildings, we tend to see fewer bulkers being constructed and vice-versa. This trend has repeated itself in this occasion. But there were other reasons as well for the fall of tanker rates, like political factors and the oil prices. Nevertheless, most analysts state that from the end of fall, rates will rebound once again.
Taking the fuel costs aside, is it a positive thing for a tanker owner to be operating in a market, where oil is traded in high prices?
My opinion, not only for oil, but for other commodities as well, is that prices should be close to historical averages, either we're talking about a trader, or the consumer. We have witnessed times when oil was traded for $11-12/barrel and commodities prices were extremely low. Shipping suffered back then. Today, in a completely different environment, shipping thrives, but in the long term the consequences will be negative for shipowners, because inflation is likely to rise everywhere, affecting the real economy and thus shipping as well, which is dependent on economy to perform well.
Nikos Roussanoglou, Hellenic Shipping News Worldwide