October 11, 2016 Leave a comment
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.
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