As we enter into a new year, the shipping industry continues to dominate global trade. On the hindsight, there are many extraneous factors like populism, risk of regulatory chaos, political sanctions, trade embargoes and Brexit, which would impact the industry significantly in the foreseeable future.
Consolidation will continue to be the dominating trend in shipping in 2019 as the industry faces a perfect storm of geopolitical tension, regulatory changes and disruptive technology.
Overall, the outlook for shipping asset prices remains bright, but several areas are more attractive than others. A VesselsValue forecast took many factors into consideration, which includes, assessing each vessel class and age. Here is a look at the most appealing segments and the fundamental reasons why ships of this size are more likely to appreciate.
Container ships have dominated the buying opportunities over the past several quarters, and many have taken advantage of this trend to make carefully informed purchases in this space. 10 year old Panamax container vessels represent the strongest buying opportunity in the current outlook.
Even though recycling activity has slowed, the global container market balance has tightened in 2018. Furthermore, declining speed has been an important factor this year and slower speeds are expected to be the new normal.
Container secondhand values increased during the first half of the year but have since shown a softer development for most sizes. Newbuilding prices have been increasing year to date for the feeder vessels and the recent ordering activity is slowly improving shipyards’ forward books. Despite the increase in new orders, the global orderbook for all shipping segments is still at low levels as deliveries from yards have outpaced new orders being placed.
Third quarter earnings for VLGCs and Midsize tonnage have been improving on the base of higher LPG volumes out of the US and a more active ammonia market. Higher LPG imports to Europe and a strong Indian market have supported Medium Gas Carriers (MGCs) and Handysizes too. The pressurized market remains very strong. Petrochemical trades are active to Asia and supported by higher US trade, but import to Europe is down, as economic activity has slowed.
The supply and demand balance for VLGCs has been improving, and this will be reflected in higher numbers for vessels. Older units are priced more competitively, with an expected upside of about 30 percent on a 20 year old unit by the start of 2020.
MGCs also represent a strong buying opportunity. MGCs of 35,000 cubic meters are also an attractive option. A 15 year old vessel could see a boost of almost 50 percent over the next year.
The Way Forward
Technological advances in the shipping industry, such as blockchain applications, cargo and vessel tracking, autonomous ships, and the Internet of Things, hold opportunities for the global shipping industry. However, there is still uncertainty within the maritime transport industry regarding possible safety, security and cybersecurity incidents, as well as concern about negative effects on the jobs of seafarers, most of whom come from developing countries.
The value of shipping can no longer be determined by scale alone. The ability of the sector to leverage relevant technological advances is as increasingly important.
The shipping industry is never a controlled market, it is about controlling costs and finding efficiency and scale to deal with the uncertainity in the markets. Shipowners would have to position their businesses to survive and prosper in the midst of all this uncertainty.
(References: Vessels Value, FTW Online, Freight Waves)
Sea News Feature, January 9