The price ratio of second-hand to new construction signals the mood of shipowners

As observers voice concern about global shipbuilding capacity over the next few years, new ship prices to secondhand ratios can provide a guide to underlying shipowner sentiment.

A few weeks ago, Höegh LNG bought the ten-year-old LNG tanker Golar Seal from Bernuda-based Cool Company Ltd (CoolCo) for just over $184 million. Together with the upcoming second survey costs for the 155,000m3 vessel, which were agreed on account of the buyer, the package totaled approximately US$190 million.

LNG tankers have a longer service life than many other ship types, but still this price came as a surprise to some as, as a ship built in 2013, it represented a high percentage of the price of a new LNG tanker ordered today. However, the deal was exceptional for a number of reasons.

Although Höegh announced it intends to use the vessel in the market for now, the company is expanding its FSRU business amid energy security concerns, rising LNG imports in Europe and an urgent need for more import and regasification capacity. Höegh signed two ten-year contracts with FSRU in Germany last year.

Second, new build LNG prices have risen sharply since early 2022, partly due to rising demand for ocean transportation and FSRU terminals, but mostly because existing LNG build yards are almost fully booked for at least the next three years. Larger and very popular 174,000m3 units are priced today between $255 and $260 million.

Clarkson Research has just released the results of the used to new vessel ratio for three vessel types based on a 25 year service life and a five year vessel value.

Analysts have estimated that a five-year-old 1,700 TEU container ship could have fetched more than 160% of a newbuild price by the end of 2021, and is still around 120% today. Used cargo ship prices soared in 2021 on record-breaking container freight rates and tight tonnage supply.

Meanwhile, a five year old Aframax tanker is probably worth around 95% of the cost of a new ship today. The second-hand price of $62.5 million comes close to new-build levels of $65 million, the analyst said. After 12 months of the strongest tanker earnings ever, Clarkson said there is a relative lack of short-term berths, drawing attention to the used market.

On the dry matter side, a Capesize built five years ago could sell for $54.5 million, almost 90% of a new ship. Again, Clarkson said this reflected relatively strong market sentiment and limited availability.

Analysts noted that today’s price ratios reflect the current upbeat mood in many shipping sectors. “These classic market indicators are still worth a look,” it said.

Source: News Network