Investment or Cash? Professional management or keep the way as it is?
Before writing this article, I have considered which issues we have to focus lately; global markets or internal dynamics and/or current situation of the companies?
In this challenging global environment, when the markets even get better surprisingly, it seems that the companies will not survive in the medium or long term if they donot have sufficient capability. Even the worse, according to the experts, managers & owners of the mentioned companies do not understand/accept their lackness. It is crucial to have qualified teams and managers apply progressive & proactive approaches to their business for all companies for continued success & survival.
Because, if the market trends continue like this unfortunately we will never see the earlier effortless client profile again in the upcoming years.
In this context, perhaps it is better to examine the main topics that are the most prominent in the economy and further analyse them again;
Despite some positive developments in the U.S. economy on growth and unemployment, uncertainties and concerns remain around the “fiscal cliff” and lacks of prompt action will likely effect economy negatively in 2013. Similarly, slowness in European Union continues to negatively affect fiscal and economic issues in Spain, Greece, Portugal and Italy. It is clear that some parties will benefit from the slowness since they are trying to penalty to the innocent people on the streets.
Further reduction in the growth forecasts and increasing threat of a global recession results weaker growth in volumes & investment
In this unstable market, I expect the banks will apply more control over the shipping & other industries in 2013.
Despite difficulties regarding oil prices and environment, eco vessels will become good alternatives and added to increased global fleet. However, these vessels will considerably spoil the market and be more competitive than normal vessels.
As we all know, current orders and overcapacity are not eco vessels therefore some investors think now is a good time to build eco-friendly ships at reasonable prices for which there will be strong demand in the future. This will adversely affect competitiveness of regular vessels.
It is expected that asset prices will fall further and the cost of regulatory compliance -as regarding to ballast water etc.- will increase to the owners.
The global market for Drybulk segment;
Drybulk orders are about 20 % of the current fleet.
During 2012, net increase of the fleet is around 12-13 %, 7-8 % expected for 2013 due to scrapping and cancellations. This is expected to overtake any possible demand growth and keep rates and values under pressure.
No more new contracts.
Port congestion is absorbing about 5% of the fleet.
High scrap prices and low freight rates encourage further scrapping.
Vessel financing continues to be limited.
Asset prices are decreasing and this creates opportunities for new investments (only for reasonable investments!).
Since we have many chemical owners in Turkey, let us see some figures in chemical segment declared by companies.
While new orders are decreasing, slippage continue.
Chemical Tanker Market
Projected New Buildings (Million Dwt)
Slippage or Cancellations (Million Dwt)
Realized deliveries (%)
Total Fleet (Million Dwt)
Net Fleet Increase (Million Dwt)
Net Fleet Increase (%)
2012 10. Month
Almost % 70-75 of total fleet is younger than 10 years.
Decreasing new orders and increase in chemical trade are positive signs for the future.
Shipyards are being further analysed in a separate article in February but summarisingly;
Shipyards in EU, Norway and other countries are being supported by open or hidden ways.
There is some cooperation between some repair yards in Europe. Meanwhile, it is expected that these cooperation will not be successful in medium/long term due to some reasons and parties do not expect this cooperation as long-life.
Return to happy old days is being postponed everyday and it is very hard to give any date for that. All estimations by some experts (!) were not enough to estimate anything.
Uncertainty make more confusions because if an owner would like to take the delivery of a vessel in the 1st half of 2015, he shall start now negotiate newbuilding project with the shipyards.
CONCLUSION: In the near future, common motto will be “stay cash and keep the current position” meanwhile if you see attractive investments, why not?
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