Sucheta Dalal :Shipping asset prices on a rise but this could be a temporary phase
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » What's New » Shipping asset prices on a rise, but this could be a temporary phase
                       Previous           Next

Shipping asset prices on a rise, but this could be a temporary phase  

May 11, 2010

Asset prices for second-hand vessels in the dry bulk and tanker segments are currently going up. However, industry sources believe that players are in a wait-and- watch mode, and the rise may be a temporary phenomenon

After shipping asset prices bottomed out a few months back, a marginal rise of 8% to 10% has been witnessed in the asset prices for second-hand vessels in the tanker and the dry bulk segments. However, industry experts indicate that this could be a temporary situation, and is likely to change with the current volatility in the global economy.


The global slowdown had led to a number of cancellations for new orders placed with the shipbuilding industry. A significant drop in shipping asset prices was also witnessed last year. Asset prices in the tanker segment fell by nearly 40% from their peak in 2008. Similarly, the dry bulk segment took a hit of nearly 70% from its peak in 2008.


Now, with some signs of revival in the global economy, asset prices have moved up by around 8% to 10% from the bottomed-out rates. “Asset prices have slightly moved up, the movement is already visible with around 8% to 10% rise,” said Vinay Kshirsagar, CFO, Shreyas Shipping and Logistics Ltd.


An official from Great Eastern Shipping (GE), which has always timed its asset purchases during a fall in asset prices, has also confirmed the trend. “Yes, asset prices have surely shown some improvement,” said an official.


However, this revival in asset prices could very well be a temporary trend. “The revival in asset prices was expected with the economy coming back on track. Asset prices for second-hand vessels are already on a rise. However, the future trend will depend on the economy. With new issues coming up in Europe, shipping will also be affected. The industry is closely related to how the global economy performs,” said SS Kulkarni, general secretary, Indian National Shipowners Association.


“Going forward, if Chinese trading activities slow down, the entire dry bulk momentum will come to a halt. It is very difficult to predict whether the trend would continue or not. It should be a temporary phase; we expect a fall in prices. Though there may be a fall, it will not reach the levels at which prices had bottomed out,” added the GE official. — Amritha Pillay

-- Sucheta Dalal