SIW1092Sale and purchase is a classic element of the shipping industry. A significant volume of secondhand sale transactions are concluded each year, with over 11,000 ships reported sold since start 2004. But some sectors have more liquid markets than others. Liquidity is the degree to which an asset can be bought or sold in the market, and liquid assets can be more easily converted into cash, so owners (and financiers) need a feel for how easy it is to enter or exit a sector.

What’s Been Selling?

This year there have so far been around 1,000 ships reported sold secondhand, and an annual average of 1,287 since start 2004. The pie chart shows that bulkcarriers accounted for 38% of sales across the period, tankers 25%, and containerships 10%. Within these figures, products and chemical tanker sales account for 17% of the total and MPP and General Cargo ships 11%, but the largest tankers, VLCCs and Suezmaxes, account for only 3% combined.

A Relative Concept

However, to compare liquidity across sectors fairly, activity needs to be put in the context of the relative size of each fleet. The bars on the graph rank the fleet segments by average sales per annum (since start 2004) per 100 ships in the fleet (start 2013). The Handysize bulker fleet leads the way with over 6 sales per 100 ships, with car carriers (PCCs) at the bottom with just over half a sale per 100 ships. The global average across the fleet (>2000 Dwt/GT) is 3 sales per 100 ships, but in reality the ratio changes over time as market and financing conditions alter. In the investment boom years 2004-07 the ratio stood at close to 5 sales per 100 ships.

What’s Most Liquid?

In terms of ship types, bulkcarriers dominate the top of the ranking with Handysizes, Panamaxes and Handymaxes taking the top three positions. The tanker markets also look fairly liquid in these terms. In general the smaller sizes in the bulk fleets are relatively more liquid, with Handy bulkers more liquid than Capesizes, and Aframaxes and Suezmaxes a little more liquid than VLCCs.

At the lower end of the ranking are the more specialised types and a range of liner sectors. The bottom eight sectors on the graph registered between them just 1.6 sales per 100 ships. These typically meet requirements served by a spe-cific range of owners, reducing potential marketability. They are significantly less liquid than those at the top of the ranking. PCCs are 10 times less liquid than Handysize bulkers, LNG carriers 6 times less liquid and containerships 3,000+ TEU are 5 times less liquid.

Time For A Liquid Lunch?

So, some shipping markets are more liquid than others; bulkers more so than tankers, smaller units more than larger ships, and more specialised sectors often far less liquid. Investors need to keep an eye on this. But if your entry or exit strategy isn’t clear, you can always get a sale and purchase broker to help you over lunch, liquid or otherwise. Have a nice day.

Advertisements