Hellenic Shipping News interviews Mr. Vagelis Moutafis.

Shipowners remain quite active in the second hand market, despite the record prices that continue to apply in most vessel types. Despite the high prices, Mr. Moutafis identifies investment opportunities in all segments of the market. For instance, in

the dry side, handymax and supramax resales from reputable shipyards with good specification, such as reputable main engine with low consumption, shallow draft, gear with good lifting capacity, might turn up to be a good investment. The same applies for small chemical tankers of 10,000-13,000 dwt and product tankers. A concrete proof of the dry bulk boom is the fact that vessel values have increased from 50% to 140%, depending on the vessel, in just 12-18 months.

Which are the main drivers between the surge in asset prices in the second hand market?
Balance of supply and demand is like always the main driver of economy and in the last months the freight market pushed at sky high levels due to lack of available tonnage suitable to cover the demand for carriage of goods by sea, such as raw materials, steels, agriculture products and other goods. Another reason is the increase of demand for cargoes, coming mostly from Far East region and especially from China that used to be called “a sleeping giant”, but not any more. By considering the vessel as a business unit, the increase of vessels’ revenues automatically means increase of value. Even if a seaworthy vessel is considered small or old or not so good it remains in the S&P market, since there is a strong and continued interest for similar vessels to carry cargoes. This is due to non availability of other larger or younger or better maintained vessels, so the older vessels’ values have only one way to go, UP. In our days it looks like available tonnage is not enough to cover consuming needs, not even the worlds’ present rate of production in some cases, such as grains, the less vessels available for sale, the higher levels we will see.

Can you give us some input on the approximate percentage of increase in prices from the beginning of 2006 for the main vessel categories (capesizes, VLCCs, containers) with an age of up to 10 years old?

Dry cargo market prices basis charter free delivery increased from 50 to 140 percent the last 12 to 18 months. For example:
Capesize bulk carrier
174,000 Dwt BOHAI blt ’06 reported sold 3/06 $62.0 Mill
174,000 Dwt BOHAI blt ’07 reported sold 6/06 $65.0 Mill
174,000 Dwt BOHAI blt ’08 reported sold 3/07 $98.0 Mill
174,000 Dwt BOHAI blt ’08 reported sold 5/07 $115.0 Mill
The above indicate an approximate 90 percent increase on price in about 14 months’ time.
Panamax bulk carrier
74,200 Dwt Japan 2002 reported 2/2006 usd 30.5 Mill
74,200 Dwt Japan 2002 reported 7/2007 usd 65.5 Mill
74,200 Dwt Japan 2002 reported 8/2007 usd 71.5 Mill
The above indicate an approximate 135 percent increase on price in about 18 months.
It worth’s mentioning that a 74,000 dwt built 2004 panamax bulk carrier achieved in January 2007 a price of usd 48.5 million, when similarly in September 2007 was reportedly sold at usd 72 million, indicating an about 40 percent increase on price in just 9 months.
Handy and Handymax bulkers purchase prices for 15 years old and younger dry cargo vessels’ have increased in the same way, at about 90-100%.

How active have the Greek shipowners proved in the second hand market during 2007? Do you have any figures regarding the investments made so far this year and in which types of ships in particular?

Greek shipowners are, as usual, quite active in the second hand dry cargo market and recently also in new building market but always careful at the same time. Shipping companies with strong background or long term contracts or listed in N.Y. or U.K. stock exchange, made their moves and face current market values. However some of the smaller medium size ship-owning companies prefer to monitor these recent developments and make a move when they feel it’s the right time.
Despite the above, according to our records Greeks have invested about usd 1.3 billion for second hand vessel purchase within 2007.

Could you define us what an investment opportunity actually means in today’s market (i.e. what kind of vessel, age and price taking into account the freight market)? I mean which have to be the specifications for a ship to be considered an opportunity?

In our opinion, the dry cargo market, although on the high side, looks a bit risky these days, however handymax and supramax resales from reputable shipyards with good specification, such as reputable main engine with low consumption, shallow draft, gear with good lifting capacity, might turn up to be a good investment, as new building prices basis delivery within the next 24 months, remain in logical levels with some profit margin.
Older dry cargo vessels’ prices are on the high side today and in a possible market down turn, trading life is not enough to cover possible losses, so we cannot consider them as an investment opportunity.
Containers of about 2,500 teu capacity are safe and “clean’ however in our opinion an investment should be combined with a long term charter to first class liner company, to minimize equity exposure and secure smooth trading conditions.
In the tanker market, 10 to 13,000 dwt chemical tankers and also MR/LR double/double product tankers look promising.

What types of ships are the most popular these days, in terms of sizes and age?

Although we receive several purchase enquiries on a daily basis for all types of vessels we can consider as more popular vessels the handy, handymax and panamax bulk carriers around 10 years old up-to resale.

In which vessel types has there been the biggest price increase in the last couple of years?

Our market is the highest of all timesm therefore prices of all type of dry cargo ships have widely increased with handymax and panamax bulkers leading the way.

Nikos Roussanoglou, Hellenic Shipping Newsο»Ώ Worldwide