The role of the finance specialist for asset pricing in Shipping Part I

 The changing landscape in the wet freight trade is also remodelling the tanker fleet pricing.

It is basically the role of the finance specialist to convert implied daily hires rates into asset prices considering the new expectations and new information elements printed by the chartering market to determine if some value might be unlocked.

There are many”might be” and “price subjects to” in these markets. Not all prices are equal. No ships are equal. No information is equal.

A ship is might be worth more to a potential buyer than another one because its operators are outperformers.

The role of a finance specialist for asset pricing in Shipping is one of benchmarking & investigation.

 

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In this market, big numbers on nice charts don’t tell outlays and operating expenses that owners and now PE investors must incur before getting a small net return.

Karatzas Marine Advisors & Co and its S&P tanker report (August 29th, 2014) provides new glimpses about the temperature on the Sale & Purchase market.

The waves from wet barrels seem to firm-up value in the asset and from a liquidity standpoint the activity is also up.

Quote:

In the Suezmax tanker market, Chevron Shipping has exercised the option to acquire three Suezmax tankers already under their long-term bareboat charter for an undisclosed remuneration; vessels were owned by Independent Tankers Corporation Limited  and were MT Cygnus Voyager” (1993, 157,000 DWT, IHI (Japan)), MT Sirius Voyager” (156,500 DWT, 1994, Ishibras (Brazil)) and MT„Altair Voyager” (135,000 DWT, 1993, Ishibras (Brazil))

these are 20+ year old crude oil tankers and it’s extremely interesting seeing a major-oil-company-affiliated shipping company ‘coming close’ to such old tonnage, whether chartering or ownership.

It’s even more interesting seeing Brazilian-built tankers acquired by a major-oil-affiliated shipping company given than Brazilian-built vessel do not exactly enjoy high reputation respect…

 

Adding to this comment, in the second-hand market for ships,  AAA charterers like Chevron have complex vetting process, older vessels are not what charterers would prefer under normal circumstances.

 

When a category of participants have persistent preferences for specific category of assets, at some point, you will notice the pattern in prices.

An opportunity to own what is persistently priced lower but higher under other circumstances may exist.

 

Basically, at lower rates, charterers are more indifferent between high quality and low (older)quality tonnage because at bottom rates, because they already minimize their cost/bbl.

By contrast, at higher rates, the spread between AAA and D tonnage will widen.

Charterers will be encouraged to take older ships to stay competitive and save transportation cost/bbl.

To do so, they will be seeking to discount(buy) the D tonnage and sell AAA tonnage to others. One quality factor is the age of the ship.

 

At higher rates, the older ships have a better fungibility, their utilisation rate will grow but charterers will play the tonnage quality game card to save precious $/bbl.

This predictable flight to quality/ flight to cost per bbl minimization pattern in the freight market will create an opportunity to structure a long freight position with the older ship in the second-hand vessel market.

 

Let’s take the MT Sirius Voyager. 

It is very possible that they plan to use it as for STS in the GC or for floating storage somewhere on the planet that’s one thing.

Chevon knows exactly what they do.

I will show you more in-depth how to structure this position and how it will gain value next time.

 

The Trade Shipping and Finance Wizard © 2014

CMT & Shipping Advisory Services

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