Automation allows more data to be used than in a traditional broker valuation, and crucially, permits back testing. This means that accuracy can be optimised and reported. Subjectivity and bias are things of the past. In addition to providing valuations, these services are also able to provide a variety of supporting information, such as up-to-date transactional data which allows users to monitor market activity. Fig.1 shows the market values for major types of five-year-old vessels.
Loan portfolios and company fleets can be regularly and reliably valued, making such services essential for banks seeking to prevent covenant breaches, funds seeking to buy or sell debt or equities related to companies or groups of vessels.
Vessel ownership is another area of traditional opaqueness, often being hidden through SPVs, long- term chartering contracts and misleading reporting. Therefore, services providing accurate ownership, relationships and historical transactions are essential for industry outsiders wishing to analyse company and fleet financial data.
Analytics and asset play In addition to the basic ship valuation and supporting information described above, more advanced analytics
are becoming increasingly available as data collection and processing techniques continue to mature. Advances in financial modelling are making market timing and asset allocation decisions in the shipping industry possible. Traditional sources of funding are less enthusiastic about lending to shipping, primarily due to the recent capital adequacy requirements coupled with the capital-intensive and cyclical nature of the industry. This is the primary cause of the recent advent of “smart money” in shipping, lured in by the stable medium-term fundamentals, positive short-term outlook, contractual flexibility and the introduction of innovative structures.
Tools and indicators that aid a participant in timing the markets, especially in times of high volatility, are much sought after. One such indicator is price momentum. This allows the participant to look for strong positive trends in prices over a specified period to support entry/exit decisions.
Ships are depreciating assets with a non-linear profile determined by market activity, as shown in Fig.3. The changes in the depreciation profile over market cycles give a view on what the market perceives as the expected working life of the vessel. In a weak market there is a strong likelihood of vessels being scrapped early. In a strong market,
Fig.2 Global S&P trends between top buyer and seller countries 2010-2013
owners anticipating good returns are more willing to spend resources in extending the life of the vessel, and this is reflected in the shape of the curve.
The market often expresses a preference for vessels of a certain age, size, or other characteristics, which can be due to chartering patterns or international maritime legislation. Following these trends can allow investors to detect under or over-pricing, or even provide early warning of developing bubbles. Certain sectors are far more liquid than others, with preference for age expressed in a time-varying fashion.
Geospatial intelligence Over 90% of the global commodity movements are carried out by ocean-going vessels. This is the preferred mode of transportation providing significant economies of scale. Supply and demand fundamentals for this industry are therefore key in providing an in-depth understanding of global macroeconomics. The demand for dry tonnage primarily arises from the shipments of iron ore, coal, grain and fertiliser, whereas the wet trade is dominated by the transport of crude oil and refined products. Demand for freight is therefore usually denoted in terms of ton-miles, with trends in demand affecting freight rates as well as the derivative contracts written on them.
Source:
VesselsValue.com
Norway UK Italy USA Greece China
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