Drewry Report Examines Investment in Ships

Tuesday, October 28, 2003
Drewry research highlights a buoyant industry but aims to prevent over-optimism by pointing to previous shipping cycles “Investment in Ships” examines the crucial factors and shipping sectors but advises caution to maintain current growth rates Drewry Shipping Consultants announced that its latest report, “Investment in Ships” is now available to purchase. This independent assessment of all the shipping markets identified that most of the world’s leading shipbuilders are in possession of a strong order backlog – Drewry considers the consequences for shipping and recommends a cautious approach. Drewry does not offer generalized recommendations or advocate particular sectors rather than others. The key aim of this report is to provide an understanding of the fundamentals and the idiosyncrasies of the particular sector under evaluation by both highlighting these features and also how they fit in with creating an informed judgement. Drewry’s special report reveals that 2003 has seen most of the pundits analyzing specific shipping sectors moving into bullish mode. This mentality, however, needs to be kept in check for those who have witnessed previous shipping cycles will know how easily – and rapidly – optimism can become over-optimism and, inundated with a surfeit of speculatively built new ships, markets can take a catastrophic nose dive. This analytical report examines the crucial factors and market areas within Investment in Ships by providing key data and insights into such factors as: - Market strengths, weaknesses, opportunities and threats - Demand drivers and key trades - Fleet size and age profiles - Supply and demand imbalances - Newbuilding/secondhand price and freight rate evaluation - Operating cost exposures The strong order backlog has led to consternation in some quarters of the industry about the availability (or lack) of berths for 2005. However on the other hand, it may be a disguised bonus for shipping if it prevents the orderbook from spiralling to heights that the shipping markets cannot support. Crucially, the report does show that the market is now getting back to a point where owners can start to make a return and rate levels should be sustainable. “2003-2004 is going to see investors and prospective ship buyers weighing up opportunities in both the newbuilding and secondhand markets and putting in their requests for ship finance,” commented Olivier Erpelding, Executive Consultant at Drewry. “Some of these applications will land on the desks of ship finance’s experienced hands. Others, however, will lure in ship finance’s more opportunistic players and the “tourist” providers. As long as people don’t move too aggressively or get carried away with the swelling optimism, then the market will continue to experience sustainable growth.” Most ship acquisitions are financed via the “debt” market – for example a loan secured against a first priority mortgage on the asset. With the emergence of the “Basle II” rules being applied to banking operations, lenders are reappraising their attitudes to shipping and, in particular, the nature of the risks involved. Drewry consequently warns that ship finance may well become more costly. This special report goes further by predicting that lenders are likely to be drawn deeper into the investigations into “sub standard” ships and any repercussions arising from major vessel losses (and pollution incidents). With quality issues rising up the agenda, understanding shipping’s nuances becomes ever more important for both borrower and lender. Drewry’s special report on ship finance is an invaluable aid for acquisition planning strategies by providing key data and insights into: - Analysis of market strengths and weaknesses - Analysis of opportunities and threats - Demand drivers - Key trades - Size preferences - Fleet size and age profiles - Supply and demand imbalances - Newbuilding / secondhand price and freight rate evaluation - Routes to capital - Ownership rationales - Operating cost exposures “Investment in Ships” is published by Drewry Shipping Consultants Ltd. Individual copies of the report are priced, including postage to any part of the world.

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