Ship prices keep on fall­ing, sales come early for ship own­ers

Financial Mirror (Cyprus) - - FRONT PAGE -

Ship prices keep on fall­ing on the back of low freight rates. Ac­cord­ing to the lat­est re­port from ship­bro­ker Al­lied Ship­broking, Jan­uary sales seem to have come early this year, though there seems to be fur­ther dis­counts to be of­fered in the mar­ket once the New Year kicks off. “With such cor­rec­tions be­ing noted it’s worth tak­ing a round-up of the price trends we have seen over the past 8 months since the mar­ket started its down­ward spi­ral. In par­tic­u­lar, it’s in­ter­est­ing to go through the Capes and Pana­maxes which have also been the ones not­ing the sharpest cor­rec­tions, while reach­ing very in­ter­est­ing lev­els of late”.

George Lazaridis, Al­lied’s Head of Mar­ket Re­search and As­set Val­u­a­tions, said “since April we have seen a rad­i­cal de­cline in prices for sec­ond-hand ves­sels in both th­ese size seg­ments. The 5 and 10 year old Capes have shown a whop­ping 25% and 26% de­cline in prices dur­ing this pe­riod, reach­ing lev­els of around US$ 39.0 and US$ 27.5 mln, re­spec­tively. Th­ese fig­ures be­come all the more note­wor­thy, as a new­build­ing or­der could still set you back US$ 54 mln, mean­ing that you can snatch up a 5 year old ves­sel at 72% of the price of a new or­der, while a 10 year old ves­sel is at just un­der 51%”.

Lazaridis added that “things get even more en­tic­ing when you look at the Pana­maxes, with prices for new or­ders set at US$ 30.0m for a Kam­sar­max and US$ 29 mln for a Pana­max (although the lat­ter is hardly of­fered by ship­builders any more), while prices for 5 year old Pana­max-es are in the re­gion of about US$ 20 mln and 10 year old ves­sels are go­ing for around US$ 14.5 mln. There­fore, in the case of Pana­maxes, 5 year old and 10 year old sec­ond-hand as­sets are cur­rently go­ing for a dis­count 39% and 50%, re­spec­tively, when com­pared to the price of a new or­der, while the dif­fer­ence be­comes even big­ger when com­pared to the cost of or­der­ing a Kam­sar­max. This has largely been due to the faster pace cor­rec­tion in sec­ond-hand Pana­max prices dur­ing th­ese past eight months, as we noted a 29% de­cline in 5 year old as­sets and an im­pres­sive 37% de­cline in 10 year old as­sets”.

The ship­bro­ker’s an­a­lyst raised the ques­tion of what does this all mean and where should buy­ing fo­cus be cen­tred on next?

Ac­cord­ing to Lazaridis, “the truth is at the mo­ment and as things stand it makes more sense to go for sec­ond-hand as­sets when look­ing purely on the price be­ing paid. There are, how­ever, many out there that will say that th­ese new­build­ings are not com­pa­ra­ble in de­sign fea­tures to the older ton­nage, while their pay­ment terms are more favourable dur­ing the cur­rent poor per­form­ing freight mar­ket. That may well be beyond the un­der­ly­ing point though, as both as­set classes are still well above where they stood in late 2012 when the mar­ket had reached its most re­cent bot­tom”.

Mean­while, “at the same time fur­ther dis­counts could eas­ily be seen in sec­ond-hand ton­nage, as there is no real bar­rier pre­vent­ing fur­ther price drops and with things be­com­ing more dif­fi­cult in terms of earn­ings, we are surely to see fur­ther dis­counts down the line. In the case of new­build­ings though things are a bit trick­ier. De­spite the in­tense com­pe­ti­tion amongst ship­builders to se­cure the in­ter­est of any per­spec­tive buy­ers, they have bar­ri­ers pre­vent­ing them from of­fer­ing dis­counts which are “too low”.

The main ones are con­struc­tion costs and ease of fi­nance. With steel prices hav­ing de­clined con­sid­er­ably and look­ing to re­main un­der pres­sure in the near-term, the first bar­rier shouldn’t be too dif­fi­cult to over­come. The lat­ter, how­ever, is a bit more prob­lem­atic. Ship­build­ing fi­nance has al­ready faced sig­nif­i­cant prob­lems dur­ing the first half of the year, and it looks as though it will be even harder for ship­builders to as­sist in fi­nance and guar­an­tee let­ters for their of­fered ships if their mar­gins are lack­ing. As such, it seems that we are primed for per­fect con­di­tions to pro­mote sec­ond-hand ton­nage in the New Year and with all this in­ter­est mount­ing, one be­comes cu­ri­ous to see at which point the start­ing pis­tol will be fired to spark off another sec­ond-hand buy­ing spree rally”, the ship­bro­ker con­cluded.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.