Whilst there hasn’t been much to shout about for many shipping sectors in 2014, total investment in secondhand sales has been fairly firm. In the first nine months of the year, recorded investment in sale and purchase transactions has almost exceeded last year’s total already, with a reported $19bn having changed hands. This week we take a closer look at the nature of recent secondhand investment activity.
In The Past
Investment in secondhand transactions peaked in 2007 when a reported $47bn changed hands across 1,860 recorded transactions. The subsequent global economic crash meant more restricted access to finance, and market uncertainty influenced a wider spread between buyers’ and sellers’ price ideas; by 2009 investment in secondhand transactions had fallen to just $15bn. Whilst 2010 and 2011 saw increased secondhand investment, markets remained under pressure, and in 2012 total reported investment fell again to $14bn. In 2013, however, there was a growing sense of optimism that market conditions would eventually improve and activity firmed towards the end of the year. As a result a reported $20bn was invested in secondhand sales through the course of 2013, and already in 2014 over $19bn has been reported invested in secondhand purchases. Our secondhand price index started to firm in Q4 2013, but at start October it stood just 3% up year-on-year, so the rise in the level of investment evidently reflects other factors.
Mixing It Up
Between 2005 and 2009 around three-quarters of reported secondhand investment was in the bulker and tanker sectors. However, since start 2010 this figure has dropped to two-thirds. One trend has been a greater proportion of transactions in the gas sector, with the majority of activity in the LPG sector where recent record earnings have grabbed the attention of investors. The increased level of activity in often higher value specialised sectors has helped support increased investment levels, and the average reported transaction value rose by 27% in 2013 and by a further 32% in 2014 to date.
In With The New
Sales since start 2013 have also often been for younger units, with the average age of sale the lowest for a long time last year at 12.3 years; it stands at 10.3 years this year so far. Resale activity has also increased; sellers have been keen to reduce exposure to large orderbooks in some sectors, whilst limited availability of early slot space at yards has driven resale activity in others.
Bigger And Bolder
Units reported sold on the sale and purchase market in 2014 have also been generally bigger. The average unit reported sold has been 43% larger in dwt terms than the average across 2005-13. This has also supported investment levels.
So there you have it. Should secondhand activity continue at a similar pace, 2014 may just see the largest volume of investment since the crash. Whilst prices have firmed a little year-on-year, other factors have been the more important drivers, with secondhand activity looking broader, younger and bigger. Have a nice day.