A report carried on this site yesterday stating that now is the best time since the 1980s to invest in shipping had many people agog, not least Panos Patsadas from brokers Target Marine Transport who adds plenty of caveats to investors mulling a big shipping foray. Life cycle, overcapacity and returns are his three variables that investors need to be wary about.
The million-dollar question in shipping has always been when to enter and when to exit the market.
The market has according to experts bottomed out, but is it the right time to invest? Possibly, but not in the traditional sense.
Life cycle, overcapacity and returns are in my opinion the three variables, which one should consider before deciding to enter.
So long as sufficient volumes of tonnage are not exiting the market, but merely changing hands, this will still keep a vessel’s lifecycle very short. This is just kicking the can down the street, as seven-year-old vessels now, in combination with moderate newbuilding activity, and moderate demand from China, will only lead again to redundant overcapacity in five years from now.
Regarding returns, potential investors should switch their mindsets from opportunistic aggressive Wall Street-like moves, and instead look for segments with underlying value. Look for and analyse segments with the smallest orderbook, enter conservatively and don’t expect an exit for at least seven to 10 years.
Last but not least, investing in the digitisation of shipping and disruptive technologies may well prove a safer and more lucrative investment, than investing in newbuildings. Spending on bytes not steel plate could be the smart play going forward. This however remains to be seen in the next couple of years, to what extent shipping will prove receptive to its modernisation or not. Yet again, this is shipping and it may prove me wrong.