Buy now – earn later

With most sectors of the shipping industry in crisis, Drewry Shipping Consultants argue that secondhand vessels bought now could prove to be bargains. Its analysis of market potential through to 2003 shows that the best returns could come from panamax and handymax bulk carriers but that most bulk carriers and tankers will cross the 10 per cent internal rate of return hurdle at some time over that period.

In its report Secondhand Ships: Investment Potential and Value for Money, Drewry says the value of secondhand tonnage is higher than can be justified by their earnings potential, and ships are being viewed as a commodity. If the pressure on substandard shipping increases the short-term market for asset playing becomes less attractive, and secondhand ship prices may move to an earnings potential basis.

The report considers the potential for a number of ships in the light of current and projected market conditions, along with the risks and rewards.

Stockholm Chartering is warning that low newbuilding prices have caused a flood of tanker orders which will lead to massive over supply unless scrapping is increased.