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‘Investment opportunities in shipping could perhaps be the best in over 30 years’

‘Investment opportunities in shipping could perhaps be the best in over 30 years’

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The latest quarterly report from Clarksons Platou Securities argues that now is the best time in the last 30 years to invest in shipping, a view not 100% held by other shipping analysts and investors contacted by Splash today.

The securities house said equities in the shipping sector are on track to deliver their first full year of positive returns since 2013. Based on supply-demand fundamentals, Clarksons Platou Securities said it expects the overall shipping sector to provide good returns in the years ahead.

The analysts who compiled the 239-page report pointed towards record low orderbooks and decelerating fleet growth as key grounds for optimism.

Moreover, as the window at shipyards for 2019 deliveries is “closing fast”, Clarksons Platou Securities said it was “increasingly confident that fleet growth will stay low, supporting a continued recovery in the years ahead”.

Meanwhile, on the demand side, the company reported that since the end of 2016, “headwinds appear to have turned into tailwinds”.

Also on the demand side, sister company Clarkson Research noted in its most recent weekly report: “[W]ith seaborne trade projected to expand at a multiple of 1.1 times global GDP growth this year, there’s now a clear signal that some of the distress arising from much slower trade growth as recently as 2015 was actually more likely the passing of the low point in a cycle. The resilience of seaborne trade brings with it backing for more positive sentiment.”

The Clarksons secondhand price index has recovered 20% since December 2016 but remains at its lowest level since December 1988. Clarksons’ index of 10-year old vessel prices relative to newbuilds, for all sectors, has improved from 42% in November 2016 to 44% currently, but is still at the lowest point since May 1987.

“In sum, from a value perspective the current opportunity in shipping could perhaps be the best in over 30 years,” Clarksons Platou Securities posited.

It went to pick out Golar LNG and Navios Maritime Containers as its top stock picks.

While agreeing with much of the fundamentals of the report, Basil Karatzas, a Splash columnist who also heads up New York-based Karatzas Marine Advisors, suggested there were still plenty for owners to be worried about in the present market.

“The prospects for dry bulk have not looked so promising in some time now,” Karatzas said. “However, still many outstanding concerns with new regulatory and environmental standards, digitisation and new platforms that have increased the risk of technological obsolesce, not to mention the risk of spare shipbuilding capacity aplenty that could switch the tonnage supply equation in a few months. Hopefully the improved prospects for the market will not be another excuse to kill the market in the bud.”

Another Splash columnist, Dagfinn Lunde, one of the most famous names in ship finance, felt that timing-wise individual sectors were at different stages of the investment cycle.

“It might still be a good time to invest in bulkers and tankers, maybe still a bit early, but clearly, in my mind, the best time to invest in bulkers was in Q2 last year. In containers, investing is a gamble except in the category from 1,100 teu to 3,500 teu and compared to newbuilding parity those are still cheap,” Lunde said.

Thomas Soderberg, CEO of Hong Kong’s Tribini Capital said the investment thesis presented by Clarkson Platou Securities was an “overly bold statement”. Like Lunde, he felt different sectors were at differing points of the cycle and seldom correlate.

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Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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1 Comment

  1. SM
    October 20, 2017 at 10:11 am

    Best time to invest was in 2nd Q of 2016 Mr. Lunde says and I wonder if statements like these take into consideration opex and roi or just compare prices and thats all. When a panamax was employed for usd 600 pd the losses she generated would certainly pump up the low price she was bought for. Right?