US and Greek capesize owners carrying biggest potential impairment losses  

London: Singaporean owners made the wisest investments in capesize bulk carriers during the bull run, beating the Greeks and US owners, new data has revealed.

Eighty-five per cent of a sample of US owners that bought capesize bulk carriers during the market peak are carrying a hefty potential impairment loss (PIL), according to data compiled for Splash by VesselsValue.com (VV).

Around 30% of the US owners sampled are carrying a PIL of over $20m, and only 15% of them are carrying a profit.

In contrast, just under 65% of the Singaporean cape owners sampled are carrying an impairment loss, but only 10% of them are carrying a PIL of over $10m (see graph 1 below).

The findings are based on a sample of 303 capesize sales starting from 2005, from which VV has calculated the carrying amount on the owner’s book. The difference between the market value and the net book value provides a measure of the PIL (or gains) if the vessels were to be sold today (see graph below).

“We also subdivided the analysis by owner’s nationality in order to evaluate whether the timing abilities of certain owners were better than others,” Capt Kaizad Doctor, VV’s director of analytics, tells Splash. “In this case, the US-based owners are the worst off and the Singaporean owners the best off. Overall, there is still a large impairment overall across the capesize sector.”

Greek owners invested heavily in second-hand tonnage from 2005 onwards, when the cape market was on the up, yet today 78% of the Greek owners sampled are carrying impairment losses – making them the second most liable cape-owning nation after the US.

Of these Greek owners, 5% are carrying PILs of over $40m, the highest proportion found in the study.

Conversely, VV data reveals that capes are undervalued in the market today, making it actually quite a good time to buy such a vessel.

Second-hand capesizes are currently trading in the lowest decile of historical values (see graph 2 below). A 180,000-dwt capesize delivered in 2015 is currently worth around $45.43m, way below the historical average of $65m (shown by the black line).