Overcapacity concerns

So here we are at the end of another tumultuous year for shipping, one finishing with much talk of overcapacity concerns and consolidation across every segment of shipping from broking to owning.

Yet I have my doubts about this rush to coin an era of consolidation. If you look at the uptick in rates on the tanker markets, for instance, nothing has changed from a consolidation point of view. Sure, there is commercial consolidation such as what Navig8 has pursued but not much ownership consolidation.

While tanker rates have rallied, I remain worried about prospects for dry bulk although I am not as bearish as some – talk of no decent markets for dry bulk through to the end of the decade is far too pessimistic. Dry bulk will have spikes especially for bigger ships but there is enormous oversupply across the board. Take handymaxes or supramaxes as an example. If rates for these workhorses of the bulker trades were to go up by $1,000 to $1,500 a day, then all of a sudden you are going to see at least 20% overcapacity if these ships decide to ditch slow steaming to maximise earnings during an uptick.

I am constantly asked what is the best way to raise cash in today’s market, here are my thoughts. So long as you have a good balance sheet and a decent track record, commercial banking is coming back in a big way that perhaps has not been fully understood by shipowners around the world yet.

In my mind there is also still an interesting market for bonds especially for those tapping markets in Oslo and New York.

Likewise, private equity firms are still working with shipowners who are established and have good credentials.

I was particularly interested to see the results of the latest online survey carried by Maritime CEO, results of which can be found on the back page. What piqued my interest most was the one asking readers what sector they’d invest in if they had $100m to spend. I’m told more than 700 people voted which shows just how many would-be shipowners there are out there!

So how would I spend my imaginary $100m? Like the readers, my first pick would be in LNG, but specifically if I could drill down a bit, it would be in regasification, something that offers a fantastic return on your money, just ask the likes of Höegh and Golar.

Given the underlying strength in LNG and gas, my second pick would be LPG, which is also clearly a high growth area. I’d also think about MR tankers and lastly with my spare change I’d bet on some smaller modern containerships for local trades, something I have seen give very solid returns in recent years.

Finally, at the behest of the editor, I’ve been asked to comment on what impact lower oil prices will have in shipping. This is simple, an old maxim I have always heard in this industry – there are two good things for shipping; one is war and the other is falling oil prices, in that order.

2015 will not be like 2014.

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 the end of 2013. He is now a board member of Maxi Shipping and co-founder of DagMar Navigation Ltd and SFG Ship Finance Global Ltd trading under the name
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