The International Transport Intermediaries Club (ITIC) said the fall in the shipping markets has created a number of difficult issues for ship valuers, with brokers in some cases even declining to provide valuations.
ITIC’s Andrew Jamieson said, “It is inevitable that some principals will simply be disappointed by the broker’s view of what the ship is likely to obtain in the current market. But brokers have also been challenged as to whether it is really possible to assess market levels if the number of sales is limited or even non-existent.
“The commercial pressures on brokers are evident. There are cases of brokers having been asked to show values to the shipowner prior to submission to the bank, together with suggestions that, if they did not do so and the owner did not like the values, then litigation would follow. Because some broking houses have long-term contracts to provide valuations to financial institutions, it is not a realistic option to stop providing the service.
“The confidentiality of valuations can be an issue for brokers. A bank commissioning a valuation may feel that the independence of the valuer would be compromised if the value had been discussed with the owner prior to submission to the bank. At the same time, brokers cannot afford to alienate their clients, but the problem can be solved by the broker making it clear to the bank that it may contact the owner.”
ITIC has recently been helping its members to redraft their certificates to reflect the drop in sales, and has previously advised brokers dealing with specialist tonnage on wording that reflects the nature of individual markets.
Jamieson said, “The majority of ship valuations are given on the basis that the sale is assessed between a willing buyer and a willing seller. With such low volumes, however, could there really be said to be willing buyers and willing sellers? The expression ‘willing buyer/willing seller’ is used to indicate that the sale is not a forced sale. If the valuation is made on a different basis, then clearly other wording needs to be included to reflect this. In one recent example, the broker stated that the view being given was on the basis of a seller requiring a prompt sale. The important consideration is that the basis on which the valuation is given should be clear to the reader.”
ITIC has recently assisted a number of its members who have been asked to provide alternatives to the traditional valuation formula. One principal requested a report on the mean average annual value of a type of ship. The vessel in question was newly completed. The report set out the vessel’s specifications and stressed that what was being provided was the mean average annual value of a newly built ship of similar description over the previous ten years. The certificate made it clear that it was not an assessment of the current valuation of the ship.
Jamieson concluded, “Time will tell how much long-term demand there will be for alternative assessments. Brokers could find they are offering an expanded range of assessments in response to client requirements. The valuer must however make sure that the nature of the valuation or assessment is clear from the certificate. That is likely to require more than simply amending existing forms.”