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“Successful investment in shipping is all about timing,” says Mark Jackson, the CEO of the Baltic Exchange, while discussing how secondhand ship prices have leapt over the past six months. Ongoing challenges in the Red Sea and the Panama Canal are causing dry bulk and tanker vessels to reroute, leaving shipping companies with several tough financial choices about how to ensure voyages remains profitable when it has been extended by up to 14 days. The entire situation has caught global attention, both within and outside the maritime business, with charter prices for both dry bulk and tanker vessels increasing over the past six months. For those already in the maritime sector, or for investors and traders with exposure to oceangoing freight rates or asset values, understanding the various aspects of shipping costs and the resulting impact on their investments is crucial when deciding to reroute. For finance players outside of the maritime sphere, the opportunity is now there to invest in shipping companies that can benefit from vessel supply issues that have led to a tightening of the market. The decision whether or not to invest is driven by a complex range of factors Data from the Baltic Exchange’s new suite of Investor Indices (BII), which offers financial insights into shipping investment decisions across the dry bulk and tanker segments, showcases the impact of global issues on the supply of vessels globally, leading to the increased value of secondhand vessels in both sectors since September 2023. In the capesize sector, the BII shows that over the past six months the value of a five-year old vessel has increased from $45.56m to $55.28m, a jump of more than 21%. It is a similar story in the suezmax sector with the price of a five-year-old vessel increasing from $71.12m in September 2023 to $81.85m in March 2024, a rise of more than 14.1%. This increase in second-hand values, as indicated by the BII, shows a tightening of vessel supply in the near-term as availability remains limited and demand for tonnage outweighs supply, a trend that has been exacerbated by rerouting challenges. Understanding this data from the Baltic Exchange could help shipping companies to maintain profitability amidst global instability. For investors looking to jump into the shipping game, however, it presents an entry point into the financial prospects of investing in shipping and when is the right time to enter and exit the market. “Freight rates are cyclical and determined by the balance of ships and cargoes but the decision whether or not to invest is driven by a complex range of factors,” says Jackson. The BII dashboard includes several investment indexes, including health of earnings, residual value and risk, recycling values, daily operating expenses, spot time charter earnings, implied five-year time charter earnings, and secondhand valuation, for four major dry bulk sectors – capesize, panamax, supramax, and handysize – and the four major tanker sectors – VLCC, suezmax, aframax, and MR product tankers, with historical data dating back more than four years. Daily opex assessments by the Baltic Exchange are broken down into crewing, insurance, and technical costs, with the latter accounting for stores, repairs, expenses, and management fees. To ensure the index is as valid as possible, the Baltic Exchange partners with a number of leading third-party ship managers such as Anglo-Eastern, BSM, Columbia Shipmanagement, Synergy, Fleet Management, and V.Group that collectively provide technical management services to more than 2,600 vessels. “The Baltic Exchange Investor Indices offer a simple data suite that allows people to make more informed decisions when investing in shipping,” Jackson concludes

The Baltic Exchange on the financial impact of rerouting disruptions

Splash Extra sits down with Mark Jackson, the CEO of the Baltic Exchange

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