Ship Acquisitions in the Dry Bulk Market Are Booming
According to Mr. Yiannis Vamvakas, Research Analyst with Allied, “confidence has returned in force, and buyers have gone into overdrive in an attempt to take advantage of the asset game at play. The freight market has reached long term highs and as such has enhanced sentiment overall while inspiring investors back into the market. On the back of this, there are many who believe that despite the rise in second-hand asset prices, there is still ample opportunity in the market for further gains to be had.
Indicatively, the asset price of a 5-year old Capesize has increased by 3.5%, while a 5-year old Supramax has upsurged by 7.4%. However, these figures are still considerably below their long-term averages”.
“At the same time, freight earnings have soared to levels that have not been seen for a long time now, with many signs pointing to further gains to be had. Below we can see a broad image of the market today, where the ratio between the asset value of each size class (5-year old units) and the gross period rate (1 year T/C) stand at the end of May of each year. Although the above graph and ratio is an oversimplified approach to give a basic idea of where we stand, the trend is still clearly visible.
Current asset prices seem to be still underpriced when compared to today’s period rates, making any buying decision at these numbers a safer bet than what we have seen in recent years and hinting of further price hikes to be made over the coming months. This pattern is clear across all size classes with a different magnitude for each of them though”, Vamvakas said.
“Of course, there are many ways to read the above figure. The truth is that this approach is based on a comparative analysis and not on a fundamental approach. However, given that the SnP market is highly driven by asset prices, it is insightful to consider the historical patterns at play. Meanwhile putting aside factors such as liquidity and strategic decisions, there are those who view today’s price levels as inflated and this to be a perfect opportunity to offload assets and cash in on the price hikes at play. Closing off, we should state that the debate over current asset price levels will continue as the current boom in activity indicates. Undoubtedly, historical data do illustrate a “buying opportunity” currently at play. However, history does not always repeat itself in exactly the same way, leaving room for some to continue to question what the “true” balance between asset values and freight earnings should be”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide