Rotterdam: One of the best-known names in ship finance talks to Maritime CEO today about opportunities in today’s tough-to-call shipping market.
Dagfinn Lunde, head of shipping at DVB Bank, sees LPG, product and chemical tankers, as well as drillships and FPSOs as worthy investments at the moment.
The 64-year-old is cautiously optimistic when Maritime CEO pays him a call at his office in Rotterdam.
“The underlying thing is that shipping is still in a nice growth mode in terms of demand. There’s plenty of countries either with high populations or lots of raw materials that are getting richer,” he says.
The main problem has been Korean and Chinese yard expansions, Lunde says.
In general terms, Lunde says the more standardised the ships are, the worse the market. Specialised ships are better, he says, such as gas and offshore.
Shipping is not as dead as some believe, Lunde maintains, pointing out how many private equity firms are sniffing around the sector at the moment.
“There are plenty of opportunities,” he says, noting how his bank alone has leveraged 40 private equity firms into shipping in the last two to three years, worth $2bn.
“Oaktree, JP Morgan – all these famous names are looking around shipping at the moment,” he tells Maritime CEO.
Getting into the individual sectors, for dry bulk Lunde sees handysizes as the most attractive since they are the most protected in terms of newbuilds on order versus the average age of the fleet. Also handysizes have been consistently the most stable earners in the industry.
“Handymaxes and supramaxes have a fantastic future in India,” Lunde observes, “especially as they source coal from Indonesia with limited depths at Indian harbours.”
For dry bulk, however, Lunde warns it will be difficult for bigger ships, with huge competition from Vale’s VLOCs meaning capesizes will be “squeezed for a while”.
On the tanker front, Lunde, a former managing director at Intertanko, says crude has little opportunity as he sees little demand growth.
Products, however, have a good outlook with new refineries in the Middle East being especially good for LR1 and LR2 ships.
“MR tankers though seen to be a bit overbuilt at the moment,” Lunde adds.
On the chemical side, Lunde sees opportunities since not much has been built in last four years and demand is upping.
On the container front Lunde praises liner companies for having rejigged their business models and swinging into profit.
They have been able to transfer the pain to their tonnage providers. Tonnage providers will struggle for a long time,” he comments.
He singles out Maersk Line for special praise. “They have been very clever with the management change. It took [Maersk Line’s new ceo] Soren Skou just two months to get the line back into the black. Maersk has now cut Asia – Europe by 21%,” notes Lunde.
On the general newbuilding front, the banker is convinced prices at yards have very nearly bottomed out. Describing the situation as “very tight”, Lunde says the maximum amount prices could still drop would be between 7 and 8%.
Despite his optimism for some sectors, Lunde warns readers that 2013 will still be very difficult for shipping.
“As more companies get stretched I would not be surprised if we see more casualties this year than 2012,” he concludes.
Lunde, with more than 30 years experience in the shipping industry, is set to retire from DVB later this year. [26/02/13]