Realizing the potential opportunities, are we on the right route?

Tuesday, 18 June 2013

“It’s unwise to pay too much, but, it’s worse to pay too little. When you pay too much you lose a little money, that’s all. When you pay too little, you sometimes lose everything, because the thing you bought is incapable of doing what it was bought to do.

The common law of business balance prohibits paying a little and getting a lot. It can’t be done.

If you deal with the lowest bidder it is well to add something for the risk you run. And if you do that you will have to pay enough for something better.

There is hardly anything in the world that someone can’t make a little worse and sell a little cheaper— and people who consider price alone are this man’s prey.”

                                                                                                                     John Ruskin (1819 – 1900)

Everybody finally knows that we will not see any positive development for the next two years (at least until the end of 2014) due to slow motion (perhaps therefore unsuccessful) precautions taken by EU and others for the continued global crisis. Despite the difficulties that the world shipping market has experienced after the beginning of crisis, some shipowners are still trying to have a better chance to survive and develop their business. In this respect, they (esp. Greek owners but not all) are ordering new vessels too.

The reasons stated by the industry leaders are;

a. Historically low prices, however nobody tells we are at the end or near the end. We still do not see any improvement signs esp. in EU and even US & China. Therefore, we all do not know where we are at the prices as top or bottom.

b. Eco vessels: the yards and manufacturers have now understood innovation and improvement are the only ways to sell any product in these hard times. Econ vessels are more efficient both in terms of fuel consumption (say savings between 3-4 tonnes to 20 tons per day for larger vessels) and less emission as the designers say since nobody tested or havenot seen any attractive sample yet. It is also very hard to rely on all yards may build eco vessels. Meanwhile, new legislations may come (lead to a more rapid phasing out of the older tonnage) and shipping may at least help to reduce global greenhouse emissions.

Generally, successful investors may create good opportunities and money from both 2nd hand and new vessels during the crisis but this time is a bit different since the crisis is not a shipping crisis. Therefore, we shall carefully read the signals from global economy, housing and banking. Any increase in oil prices may also affect positively to the banks since oil majors shall use their profits in the banks for further expansions.

In the light of above, there are two ways (perhaps one sad more) subject to your dynamism and potential;

1. Analyse the newbuilding markets and new designs for the future (inc. 2nd hand market & resales), create your future fleet and take the advantage if the market recovers (?).

2. Unless you are not active in specialised markets such as offshore, LPG, LNG, dredgers etc., you will accept that newbuildings are not required nowadays!

The last one could be transfer all assets to other industries and start a new beginning which means closing the shipping file. New beginnings could be harder or more suffering than usual if you do not know your new industry rather than shipping as well.

All shipping companies nowadays should think straight earlier than ever if they would like to stay alive. For any issues, we recommend you to select the right one, not the cheapest one for a long-term drive.