Clarksons Research has crunched the numbers to demonstrate how asset-play timing can still generate big profits despite long-term cumulative earnings for major ship types not differing a great deal.
The UK company’s analyst Trevor Crowe has looked at profit generated after operating expenses since 2008 by a typical capesize bulker, an aframax tanker and a 4,400-teu panamax containership.
“For those with a focus on long-run investment performance, after almost 14 years, the cumulative earnings across the three units stand within a range of $14m,” Crowe said.
This range was $33m at the end of 2017.
“But this also reminds us that success for shipping investors often lies in getting the timing right,” Crowe said.
A 10-year-old aframax purchased at the end of 2018 for $21m would have since generated $19.8m in earnings after opex, he calculates.
But, even more spectacularly, a 10-year-old 4,400-teu boxship bought for $11m would have since generated $41.2m, almost four times the original outlay.
“So, over a long course the cumulative results today look fairly similar across the three vessel types. But those with an eye on asset play opportunities will no doubt have kept a close eye on the swings in earnings along the way,” Crowe added.
As the bulker market benefited from a rebound after the financial crisis, following major Chinese government stimulus, the typical capesize had generated $23m by the end of 2010.
“However in the following six years, capesize earnings, often near opex, didn’t add too much to the cumulative total, reaching $29m by end-2016,” Crowe said.
Aframaxes benefit from rallies
Since then, largely improved conditions in the bulker sector have seen cumulative earnings grow steadily once more, reaching $48m by the end of July.
Aframax earnings hovered not too far above opex for a few years after the financial crisis, with aggregate earnings standing at $14m at the end of 2013.
However, benefiting from a 2014/15 rally in the market, cumulative profit had surpassed the capesize total by October 2015.
Further spikes in tanker markets in 2019, driven by sanctions, and in 2020, caused by storage demand, and improved earnings recently following the impacts of the onset of the Ukraine conflict, have seen cumulative earnings for an aframax maintain a lead over the capesize, reaching $62m at the end of July.
“However, perhaps the most eye-catching trend belongs to the 4,400-teu container ship,” Crowe revealed.
From depression to boom
“The boxship charter market was rooted at fairly depressed levels for much of the 2010s, and the vessel generated cumulative earnings after opex of just $11m by end-2020. But what a difference the last few years have made,” he said.
On the back of “extraordinary” container markets last year and this, supported by severe port congestion tying up capacity, and a firm trade rebound after the initial impact of Covid-19, the last 19 months alone have seen $39m added to the cumulative earnings total, taking it to $50m, the analyst added.
This surpasses the capesize total, if not yet the aframax.
Shipping markets overall have seen a strong performance in recent times, Crowe said.
The ClarkSea Index of major rates averaged $38,731 per day over the last 12 months, compared to an average since the onset of the financial crisis of $14,736 per day.
