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Bright spots amid the gloom

Bright spots amid the gloom

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So here we are about to mark six years since Lehman Brothers fell and shipping remains in the doldrums.

I get the feeling that many speculative investors will look for signs for the exit sooner than people think, rather than invest in more loss making ships.

Lots of investors have already felt some disappointment because the market is not picking up like many thought it would, the spark in dry bulk led by capesizes seen in mid-August is just that, a solitary spark, unlikely to last long.

There is, I’m afraid to say, a negative outlook for so many sectors in shipping at the moment.

Since this magazine will be appearing at the world’s largest shipping show, SMM in Hamburg, it seems only right that we have a little look at what is happening in the world of German finance. The simple answer is not a great deal. Owners there continue to be under extreme pressure. Containerships in particular are struggling and the German ship finance scene is a shadow of its former self. Most German shipping companies are single ship companies and will struggle to survive. The German fleet will shrink considerably over the next two years is my honest prediction.

It is the Greeks and the Chinese who are buying these bankrupt German ships, and plenty more besides.

The Greeks continue to be on a quite amazing fleet buildup charge. They have been putting money aside in the past years and buying with equity rather than loans. They will continue to buy. A lot of them are also fronting for private equity. Bigger Greek owners are diversifying more into LNG and offshore than the small guys, who are more focused on traditional dry bulk and product carriers.

Elsewhere, I am still a believer in the OTC offerings in Norway, it has plenty of legs left, and I expect it to pick up again soon as it is a very liquid market with a lot of people needing to reinvest. It is also a very practical market for many non-Norwegians, especially those from the US and the UK.

I cannot see too many shipping IPOs working out in the present climate. It is hard to convince an investor to go into a market where income is less than operating costs.

When we look at the fortunes of the shipping sector it seems to me there has been at least one solid return to the normal, traditional ways of shipping. The spot market is the key these days to assessing what’s going on, as it traditionally always was until a blip in recent years.

I am perennially being asked what are the sectors to invest in. Readers of Maritime CEO take note: I still favour investment in LPG because as long as the LNG market is growing, LPG is a buoyant byproduct. Moreover, LPG will get even better once the US starts exporting. Another key to why I like this segment is that there are not many yards that can build this ship type so there is a limited output of newbuilds. If you want a new LPG carrier today, you have to wait till end-2016 at the earliest.

I am also confident that the offshore sector is still a good one to be part of. The great thing about offshore is the solid charter parties, something shipping often sadly lacks.

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Dagfinn Lunde

Dagfinn Lunde, previously head of DnB New York (90-95), Head of INTERTANKO (95-00), and on the board of DVB responsible for the shipping and offshore division from 2000 until end of 2013. He is now a board member of Advantage Tankers, Dynamic Drilling and Maxi Shipping and co-founder of DagMar Navigation Ltd.

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