View non-flash version
October 2013 www.sname.org/sname/mt (opinion) that the jump in demand required ships. Shipping eectively became a proxy for the cargos. Traders of all kinds, investment banks, hedge funds, and private equity and sovereign equity funds entered the charter market and helped drive up the rates faster than real demand. Ship owners enjoyed the most pricing power they had ever had in history and shipbuilding ourished. A brief period of oversupply was anticipated, but not the global nancial meltdown and slowdown in trade growth. By 2010-12, private equity and hedge funds, which had invested in ship owning companies during the boom (2005-2009), were less interested in shipping companies. ey saw ships and eets of ships as a separate asset class, reasoning that shipbuilding prices were as low as they were likely to go, so the ships themselves were stores of wealth that would grow as prices of newer ships rose. About the same time, the U.S. Federal Reserve Bank, respond- ing to the global nancial meltdown, bailed out banks, reduced interest rates to virtually zero and made sure they stayed low by buying $85 billion a month in bonds?a strategy intended to push investors and savers to seek riskier investments in search of better yields. Note the word risk? and who is taking it. Tomorrow While the risk of yesterday was operational, the risk of tomorrow is more apt to be regulatory. In spite of the oversupply of ships of all types, private equity funds and ship owners are investing in new eco? ships that consume less fuel than those that have been deliv- ered even recently, on the assumption that actual (versus claimed) fuel savings will be realized. Will the older, less sophisticated ships be resold at a loss and operated by their new owners at slow speed to minimize fuel consumption and eectively compete in the charter markets with the eco types? ose ordering eco ships will generally avoid operating them in the volatile spot market and seek regu- lar monthly payments under time charters where the charterer assumes the cost of fuel. e charterers will favor the most fuel-e- cient vessels, but the competition from written-down older vessels will result in the owners of eco ships having to share the fuel sav- ings with their charterers. Will it pay to upgrade or scrap so-called non-eco types early? What about the cost of required new ballast water systems (BWMS)? While all ships must eventually have a ballast water management system, the implementation date is some years away and there is a good chance the compliance date for ships without BWMS will be delayed. If the ships can be sold before compliance is mandatory, the risk will be rewarded. Understanding Risk Dierently continued While the risk of yesterday was operational, the risk of tomorrow is more apt to be regulatory. NEW - IMPROVED Zoellner Sound Reception Device Model 414/2 ? Only SRD Performing All of the Following: t Receives Sound Signals 180° in the Audio Band 70 Hz to 820 Hz t " Q Q S P W F E U P 5 F T U $ P O E J U J P O T J O * &