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The real determinants of your vessel value

Size and timing determine your vessel value

Vessels are million-dollar investments and before the owners place them on the market, the values must be carefully analysed. Size and timing are the main factors determining the price of your vessels – which spells either profit or better off not selling.

Whiches and whys
An analysis released by Turkey’s Dokuz Eylul University showed ship types whose value decreases the most due to age are those used in gas transportation, while the least affected ship types by age are those used in bulk transportation. The results were obtained from a ship sale study conducted between January 2013 and December 2019, and involved 84 monthly reports.

Ozan Hasret Gültekin, from the University’s Department of Maritime Business Administration is one of the four authors for the findings. They observed gas carriers are the types whose sale prices are most affected by age. A 1 per cent change in age causes a 0.72 per cent change in ship value. Oil tankers and container ships follow, and the least affected are the bulk carriers.

The most common assumption is increased maintenance and operational costs corresponding to the vessel’s age that contribute to the depreciation. This suggests why gas carriers are more sensitive to rates’ fluctuations. Additionally, cargo owners would prefer to charter oil tankers than owning them given that charter contract prices are less prone to revisions. Oil prices would also determine the vessels’ demand. However, technology is an overlooked culprit in vessel value depreciation. Naturally, shipowners would likely pump in extra dollars for heightened efficiency to facilitate more voyages.

Finally, sizes do matter for boxships. Gültekin’s paper noted both bulk and gas carriers share the same denominator. Simply put, the quantities transported will balance the demand and supply scales especially for high-value cargoes. This principle answers the question of increased earnings per units, but is not applicable to oil tankers due to inventory costs.

Marine Online has a team of experienced brokers who keep a close pulse on market movements. Shipowners who are looking to expand their fleet or profit from sales can tap into Marine Online’s expertise for the best possible vessel transactions.

 

Marine Online Media Team
Please email us at marketing@marineonline.com to contact the author for this article.

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