Room for optimism in some ship sectors insists VesselsValue

Shipping analyst VesselsValue has forecast upsides for LR1 tankers, handysize bulkers and panamax container ships.

In its latest report the analyst said: The price of prime aged vessels is expected to rise over the next two years.

“Putting extended trade disputes aside, most market segments have favorable tailwinds. The contraction of yard capacity is expected to support the replacement value of ships, while short term earnings have either bottomed, or started to recover in most markets. The charts below show the expected performance of a fixed age five-year-old asset. Vessel specific forecasts are available to subscribers.”

Based on the decision by by OPEC and Saudi Arabia to increase oil output and the recycling of older tankers, VesselsValue maintains tanker asset values will rise during the second half of the year. Chief among the winners will be LR1s.

“The run up in demand for distillate flows ahead of the 2020 bunker swich over should benefit large clean product tankers. LR1s are currently seeing depressed asset values, and the expected value on mean reversion alone should benefit owners,” the report said.

Meanwhile, dry bulk asset values are benefiting from higher earnings prompted by a steady rise in ton mile demand and fleet recycling efforts in 2016 and 2017, as scheduled deliveries of outstanding orders are moderate.

More controversially, VesselsValue predicts “a rebound in the containership as the consolidation of commercial controllers is leading to more sustainable rate structure. Asset values are expected to retain their increases through the end of the forecast window due to the small orderbooks in most segments (ULCV excluded).” The containership sector, more than any other sector looks increasingly vulnerable to what looks to be an escalating trade war between the US, China and the EU. Add to this high oil prices, overcapacity and emerging evidence of battles for market share, and such optimism looks to be less than justified.

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