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Timing is not everything

The dry bulk industry has seen increased sale and purchase activity lately with investors getting excited over the attractive deals the market has to offer. But keys to success in shipping investments do not only stem from getting the timing right, advises Anders Liengaard from Liengaard & Roschmann Maritime Advisors.

Timing is everything in shipping. The phrase is well known and to a certain extent also correct. If you get the timing right it’s like hitting a home run. And if you get it wrong, you probably won’t get past the first base. But the importance of timing also pushes other relevant factors into the background and the keys to a successful shipping investment may not only be the three Es: Entry, Exit and Expectations, as was proclaimed on this site a few days ago

Let’s be honest. When is the last time you overheard a conversation about ships designs, performance tracking, or OPEX cost at a greater function when it is much more interesting talking about market predictions where everyone can be experts but where no one will be held accountable for their views.

So why do we spend so little time on talking about the actual ships? A bit of historic background may help explain why there’s a lack of focus on the hardware.

Before the Chinese began their massive entry on the shipbuilding scene, dry bulk tonnage was being built mainly in Japan, Korea and a few other places. The designs would usually be house designs with very little, if any, possibility to change any features. This changed when new yards started appearing in China. Many new Chinese yards started building ships on licensed standard designs making it possible to design your own ship, much in line with how you order a luxury car these days. Cream leather interior, paddle gearshift, etc.

Consequently the dry bulk industry now has a very diversified fleet on the water where it can be difficult to distinguish between a Ferrari and a Fiat. Because of the complexity of designs, the desire for the industry to have a more transparent method of comparing ships is backfiring. Information on ships transactions are being shared widely on various forums with very little data support making the comparison useless or even misleading. As an example a leading newspaper reported the following ship sale back in September: “……the CMB Coralie (53,000-dwt Chengxi built 2009)….was sold for USD 9.3m” and it went on to compare the sale as follows: “By way of comparison, Bariba of Greece last month sold another Chinese built bulker that is two years older – the 55,000 dwt Privsea (built 2007) – for USD 9.5m.”

A quick glance at the two vessels particulars reveals two very different ships with very different income potential. A deeper analysis including OPEX mapping and upcoming surveys, and taking the value of money over time into account (Discounted Cash Flow method) just makes the point even more clear. You cannot compare apples with oranges.

Timing is important in shipping. But it tends to steal the focus from other important matters such as acquiring the right assets.

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