‘Sell in May and go away’ is an old adage applicable to stock market investors. The belief that the strongest gains are made in the period between November to April and that it’s best to sit on cash over the summer is partly supported by historical data, but it is probably not a strategy that is going to make you rich over the long run. As far as shipping is concerned, this column has previously discussed how the ‘summer downturn’ has become a thing of the past, replaced by Chinese New Year as the time the industry takes a well-earned rest.
So what is in store for this summer? After Covid-19 saw any holiday plans thrown out the window, many are hoping that this year will at least allow some sort of respite from working from home or a semi-staffed office. The lifting of travel restrictions seems to be proceeding in some countries in the stop/start manner more akin to the driving style seen in a Hong Kong taxi, so plenty of people are just not going to bother to make plans. That might be a wise move – shipping markets are evolving at such a pace that the stress of trying to navigate ever changing quarantine rules is going to be matched by the stress of FOMO (fear of missing out).
Shipping markets are evolving at such a pace that the stress of trying to navigate ever changing quarantine rules is going to be matched by the stress of FOMO
The clamour for containerships and bulk carriers has seen sale and purchase volumes skyrocket and there is a firm belief that values are still lagging behind earnings. So it’s not too late to grab a seat at the table, which is currently serving up the most bountiful buffet in years. It’s only 12 months ago that many owners hoped that when the phone rang, it wasn’t their bankers asking about loan-to-value covenants – now those calls are from brokers chasing them with offers to sell or charter out their now much more valuable tonnage.
Will it last? Of course it won’t. It never does – the container fleet will see the highest rate of deliveries since 2010 when most of the 344 ships ordered this year will deliver. Surely by then the supply chain chaos which is currently seeing record earnings will be alleviated? Maybe not. When the boss of one of the world’s major liner companies says the market won’t return to normal before early 2022 and charterers seem willing to fix at healthy rates for ever increasing periods way beyond that date, it looks like this rally has still got plenty of steam in it. Perhaps the people who should be heading to the beach are the owners who have ships coming free in the third quarter and who are already besieged with enquiries – sitting it out for a couple of months currently doesn’t seem a bad option.
What has been a surprise this year has been the number of ships getting sold when carrying out a pre-purchase inspection has been all but impossible. Many potential sellers have taken the initiative of getting a third party report prepared from a local surveyor who can actually get onboard, whilst plenty of buyers have taken the risk of waiving inspection entirely and bidding blind. One senses that there are still buyers who would only move when they have assurances from their own superintendent, so with the easing of travel restrictions, that pent up demand may be released, driving prices further.
Whether you chose to stay at home and stay in the game or shut up shop and come back in the autumn to hopefully even better times, have a good summer.