Changes In Fashion: Panamax Vs Post Panamax Container Normalised Transaction Analysis


Premiums and discounts for vessel features change over time (fashion). These changes are due to shifts in preferences by the market for different vessel features and characteristics, which in turn are determined by underlying customer needs, the economic environment and geo-political events. Here at VesselsValue, we constantly analyse these changes and the effect they have on vessel values. One of the tools we use is our “Normalised Transaction Analysis” within our market value model.

Our market value model uses a series of algorithms to determine current vessel market values through the relationship between five factors: ship type, age, size, features and the current state of the market.

In “Normalised Transaction Analysis” we begin with the transaction price of a fair market transaction; we then use our market value algorithms to adjust the transaction price for the five factors. After stripping away the effects on value of features and characteristics of the transaction we arrive at an equivalent transaction price for a 0-year-old, generic size and specification vessel in a flat market. Applying this process to all transactions in a sector allows us to compare normalised transaction prices.

panamax-vs-post-panamax

The graph above shows this “Normalised Transaction Analysis” for Panamax and Post-Panamax container vessels.

The combined factors of the expansion of the Panama Canal; the industry’s pursuit of greater economies of scale and the depressed market, of which Hanjin is a victim, mean that the difference between Panamax and Post-Panamax container values is growing. In “Normalised Transaction Analysis” we can seek confirmation of this trend and this is demonstrated in the chart.

Along the Y-axis we measure the normalised value and the X-axis measures time. This has been indexed for both Post-Panamax and Panamax container normalised values. Normalised transactions are represented as scatter points and the linear regression through these two groups of transactions shows that whereas Post-Panamax normalised value remains stable (regardless of current market) the trend in Panamax normalised value is showing a continued downward trend.

The scope of this type of analysis is to identify trends in value differentials between vessel features. Example applications of this analysis include looking at the changing premiums and discounts associated with different features and characteristics such as yard, engine type, tanker coatings, gas containment systems, hull type, pump type, ice class, DP class.
Source: William Bennett Senior Analyst, Vessels Value

VV Market Report and Country Report


VesseslValue has redesigned its august_market_report. The latest one is for the month of August 2016, and contains commentary on values.

The country report looks how_many_vessels_at_demolition_value and the spread across the sectors and regions.

Shipping and the Olympics


Olympics vs Fleets

Team GB is having an amazing Olympics, and after watching the amazing symmetry of the pairs diving into a green swimming pool, I thought I would strive “Citius, Altius, Fortius” to find a tenuous link between shipping and the Olympics.

According to a genuine study entitled, “The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games” by Bent Flyvberg et al of the Said Business School (University of Oxford, 2012, updated 2016), the Olympic games held over the last decade have cost, on average, USD 8.9bn to run. This is a huge capital cost, for what is sometimes a one-time use of the facilities. This average cost is equivalent to one tenth of the value of the Greek fleet. Indeed, compared to shipping, in economic terms, the stadia and facilities built to host a particular Olympic event can be seen as the means of production, in the same way as a vessel is the means of production in shipping.

The accompanying chart compares the cost of the means of production of both industries. In other words, the cost per event at the Summer Olympic Games between 1972 and 2016 (where data is available) and the average VesselsValue market value of the host nation’s fleet. Is there a correlation? No, there is no strong correlation, (the correlation is 0.40 for those who are interested), but we can pick out a few highlights from the data. The USA has the highest value fleet at an average of USD 25.7m per vessel (due to the requirements of the US Jones Act), but spending on Olympic events was only USD 3.3m per event for the 1984 Los Angeles Olympics, and USD 15.3m per event for the 1996 Atlanta Olympics. These figures are below the median of USD 20m per event.

The UK managed to spend the most at USD 40.5m per event at the 2012 London Olympics, but this does include the USD 90m spent on converting the main arena into a football stadium (for West Ham United FC). Interestingly, Brazil’s estimated cost per event is closely aligned to the average value per vessel in the Brazilian fleet (see chart). So while there is no link between shipping and the Olympics, there is some symmetry to be found, rather like watching the pairs diving into that green swimming pool.

How are Tankers Valued?


Reprinted from the June issue of Marine Log
JUNE 17, 2016 — In this article we explain how VesselsValue produces tankers valuations, and look at some interesting recent sales. Who were the top sellers of tankers this year? By Craig Jallal, Senior Data Editor, VesselsValue (Extended Coverage from Marine Log’s June 2016 issue).
The birth of VesselsValue was driven by timing and need. In 2008, the crisis in the financial market extended into shipping. The dry bulk sector and the containership sector were hit the hardest, and while tankers remained relatively buoyant, banks needed to assess their capital commitments against the value of the assets being financed and being used as collateral. However, in the depth of the crisis (2010 / 2011), ship brokers were telling clients they could not value the ships as there had been no recent sale or “last done” in ship broker speak. Richard Rivlin, a sale and purchase broker with 30 years’ experience, had long felt that an automatic valuation system could be built, which would produce valuations in any market, at any time. Luckily, his brother is a Professor of Mathematics, and together they designed and built such a system. It quickly became apparent that the highly detailed multi-level regression model was far too complex for normal spreadsheets, and a specialist modelling company was employed to develop the model.

The model is fed by two databases. One contains the features and specification of the ships arranged in a unique structure that allows the computational model high speed access. This database is researched and compiled by VesselsValue own team of 30 researchers and analysts on the Isle of Wight in the UK. The second database consists of sale and purchase transactions and charters. Both feed the mathematic model which is operated by a team of quantitative analysts. The aim was to produce an instant, accurate and always available online ship valuations for the banks and finance houses, that form the main customers of VesselsValue.

Tankers Valuation
According to VesselsValue, five factors make up a valuation:

Type (VLCC, Suexmax and so on)
Features (shipyard, hull, and so on)
Age
Cargo Capacity
Freight Earnings
Each factor is broken down into further elements that are scored. As an asset, tankers are relatively straightforward, being highly commoditized, and standardized in terms of size ranges and specification. In part this is due to the international safety and pollution control legislation that has been forced on the tanker sector. This level of standardization makes VesselsValue task somewhat easier when it comes to scoring the factors, than offshore vessels, which have just been added to the system. In the case of tankers, there are around 140 scores. One of the most important scores is the shipyard. A vessel built in China is less desirable than one built in Japan. A well-published example is the one shown above. In November 2014, the New Century-built Supramax bulker ACS Diamond was sold for $10 million. The previous week, the slightly older Japanese-built pair of Supramaxes were sold for $15.5 million each. This was an implied discount of around 40% between Japan and China. However, the shipyard scoring goes into several levels of sophistication, including many ships the shipyard has built and when the last vessel was constructed.

This model is continually updated and recalibrated overnight to give the closest possible fit to the reported sales prices. It is the analysis of the sales that can produce the weightings required for different shipyards. These are applied to all shipyards, not just Chinese shipyards.

So far VesselsValue have performed over 1,000,000 valuations to date, about 400,000 a year and the number is increasing.

How Accurate is VesselsValue?
The split of VV customers are banks and finance houses, owners and other maritime industries such as lawyers, insurers and charterers – sophisticated market participants who insist on knowing the methodology behind our valuations. But ultimately they want to know how accurate are our valuations because this will affect their bottom line. Valuation accuracy is assessed as the difference between the price a vessel is sold at, and VV valuation on the day before the actual sales date. This is expressed as a % of valuations within a certain band of accuracy and shown in a chart form. The accuracy report is available on the website.

Tanker Valuations Development
According to the VesselsValue transactions database, between the start of 2012 and May 2016, a total value of $143 billion of tankers have been traded on the sale and purchase market. During that period the value of second-hand tankers has steadily increased, as can be seen from figure 1 (“VV Tanker Matrix”) below of the VV Tanker Matrix, expressed as USD / DWT.

During that period, the MR tanker has been the most frequently traded tanker type, both in terms of number of sales, and value (see figure 2 “Total Value by Type of Tankers Sold 2012 to Date”).

So far in 2016 (to 15 May 2016) 83 tankers with a total value of $1.4 billion, have been traded on the second-hand market, and again the MR tanker is the most popular (see figure 3 “Value of Tankers Sales Jan 2016 to YTD).

Interestingly, the average age of MR2 (Chemical / Product) tankers sold in the first five and half months of 2016 is only three years-old. Altogether 17 of these vessels were sold in this period, with eight tankers being sold by owners in the USA (these were not Jones Act vessels).

The majority of tankers and the largest value of tankers sold so far this year (2016) were constructed in South Korea, followed by Japan and China. As far as owners are concerned, the lead seller across all types of tankers was Chembulk Tankers, Scorpio Tankers and companies associated with the Navig8 group (see figure 4 “Top Ten Sellers of Tankers Ranked by Number of Vessels Sold”).

Recent Sales of Interest
The top three sellers have sold tankers for completely different reasons and strategy. In January 2016, Chembulk Tankers was sold by parent company Berlian Laju Tanker (BLT) to private equity investor Kohlberg Kravis Roberts (KKR). Chembulk Tankers is said to have a number of Contracts of Affreightments (CoAs) and the older tankers were surplus to requirement. This is part of the KKR growth strategy to rebuild the Chembulk Tankers fleet. KKR has also invested in a fund to invest in two Greek bank shipping portfolios.

The number two top seller, Scorpio Tankers, was a tactical, opportunistic sale. The purchaser, Bahri (formerly known as National Chemical Carriers of Saudi Arabia) is on something of a buying spree. Bahri has recently purchased two VLCCs from Tanker Investments in December 2015, for a reported $77.5 million. The five 2014-built MR2 tankers were sold en bloc for $167 million are trading in the UAE under Bahri CoAs.

The third most active seller, Navig8 Chemical Tankers, Inc., sold the four resales (the MR2 tankers are due for delivery in 2017) under a ten-year bareboat charter (with purchase option) for a reported $35 million each. This was an internal sale within the group, and part of a longer term strategy.

Cocaine Cargo was 1,700 times the Value of the Tug


Tug crew guilty of UK’s biggest drug bust

Thu 14 Jul 2016 by Martyn Wingrove

Hamal

Royal Navy found 3.2 tonnes of cocaine on 1979-built Hamal

Two men were found guilty of an international drug smuggling ring using an anchor handling tug. Mumin Sahin and Emin Ozmen were found guilty of smuggling £512 million (US$677 million) of cocaine on tug Hamal. This was the UK’s biggest ever drugs bust when made more than a year ago.

When the Royal Navy intercepted the 1979-built anchor handler 100 miles off the coast of Scotland in April 2015, they found 3.2 tonnes of high purity cocaine in the ballast tanks in the bottom of the vessel. The value of the cargo was around 1,700 times higher than the value of the tug. According to VesselsValue, the current market value of Hamal is around US$400,000, assuming it is in good condition.

Prosecutors in the Glasgow High Court said the tug travelled from Istanbul, Turkey, via Tenerife to South America then on to the North Sea. Mr Sahin was the captain of the vessel, with Mr Ozmen second in command. According to the BBC, other seamen on the vessel ‒ Kayacan Dalgakirin, Mustafa Guven, and Umit Colakel, and Ibrahim Dag were cleared of the allegations after the jury returned not proven verdicts.

 

Reprinted from Tug Technology and Business

What Will be the Impact when the Newly Extended Panama Canal Locks Open?


What will be the impact on shipping when the newly extended Panama Canal open today (26th June 2016)? Figure one below shows the physical changes to the dimensions of the old and new locks on the Panama Canal (time lapse video of the construction).

Fig 1 New Panama Canal Dimensions
Under the old dimensions, the widest containership that could pass through the Canal was one with a beam of 33m – Panamax (3,000 to 5,999 TEU). The ships are pulled through the old locks by “donkeys”, which are small gauge locomotives, and often a sea cadet on his first passage would be given a bucket of water and told to water the donkeys. Interestingly, there has not been any clear indication from the Panama Canal Authourity if the old locks will continue to be operated in parallel with the new locks. These old Panamax containerships make up around 16% of the current capacity of the containership fleet.

Fig 2 New and Old Panamax Containerships
As trade increased, and due to changes in trade routes, containerships wider than 33m were built. In theory, these older Post-Panamax containership (3,000 to 9,999 TEU – see figure 2) will be able to use the new locks, too. These currently make up 22% of the fleet.

The New Panamax (10,000 to 13,399 TEU) containership, also known as Neo-Panamax, currently makes up 18% of fleet by capacity, according to mapping, ship search and valuation provider, VaesselsValue, but it is expected that this sector will replace the old Post-Panamax.

It is expected that the old Panamax containerships will cascade downwards into the other sectors, and may even “interfere” with the Feedership trades (1,100 TEU), should the rates decline to comparable levels. This will most likely decrease the values of old Panamax vessels, and may lead to a new round of sales for scrapping.

Fig 3 Seatime Savings

The increase in capacity able to pass through the new locks and the sea-time savings (see figure three) for the larger ships will be significant, but the impact is hard to assess until the liners start using the new locks.

The top five New Pananax containership owners are shown below (figure 4).

Fig 4 New Panamax Owners

According to some studies, the opening of the new locks could double the volume of total trade (tankers, dry bulk carriers, containerships and gas) passing through the Panama Canal. So far, the emphasis has been on the liner trades and their use of the new locks on the Panama Canal, but the LPG and LNG gas carriers are expected to be significant users, too.

VV is Looking for a PR Manager in London


VesselsValue is looking for a PR Manager to join the PR team in the London office, working with the Head of PR, Claudia Norrgren and Senior Data Editor, Craig Jallal (me).

About VesselsValue

VV is the world’s leading online vessel valuation provider. We have over 350 clients spanning 45 countries, including major banks, investment funds, shipowners, ship managers and more.

We have 4 offices: London, (Hammersmith), Isle of Wight, Stoke and Singapore. We currently have over 75 employees and are rapidly expanding, looking to increase growth of VesselsValue in Asia.

VV is a creative, forward thinking and hard-working company and the successful candidate should share these values.

The Role

On average VesselsValue features in around 30 articles a week and this coverage is vital to the continued growth of the company.

Your role will be to establish new press relationships with magazines, editors and journalists throughout Europe and the Americas. You will need to be self-sufficient in creating story ideas to pitch, finding inspiration from the various VV databases. You will be supported by the Senior Data Editor, who answers interview questions and creates data/reports for press, as well as the Head of PR, who will be based in Singapore and covering the Asian magazines.

The ideal candidate will be a former shipping journalist or have experience in shipping PR.

PR Manager role will include, but are not limited to:

  • Read financial, national and shipping articles for inspiration and potential contacts
  • Make contact with and account manage journalists and publishing houses
  • Meet press at events, conferences and meetings with the Senior Data Editor
  • Work with the Head of PR to design and create reports in line with the PR & Marketing Plan
  • Work with the graphic designer to design final infographics and reports
  • Discuss story ideas with the Data team on the Isle of Wight
  • Source quotes from the right VV member of staff and write interview responses

Key skills required

  • High skill level in excel (pivot tables, Vlookups, IF functions are used daily)
  • Must have attention to detail – journalists will print verbatim what you send them!
  • Write fluently and concisely
  • Network at conferences
  • Make contacts and account manage
  • Multitask various data projects at once
  • Hard working
  • Creative
  • Design skills for reports, graphs and infographics
  • Shipping background essential

Please note: Don’t send you CV and covering letter to me. Please send them to recruitment@vesselsvalue.com.
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