19 July 2023 (Lloyd's List) - IT IS still not a good time to buy dry bulkers and containerships, as these assets might still be overvalued, an industry conference has heard. The softening of the secondhand vessel trading market is still half-way down the road, Shanghai Jiuhe Ship Import & Export deputy general manager Liu Siyuan told a vessel investment forum in Ningbo.

After experiencing a surge during the lockdown era, charter rates have dropped significantly, with container and dry bulk shipping markets falling back to pre-lockdown levels. However, vessel prices have only retreated half-way from the peak in 2022, Liu said, noting that the gap indicates potential for further price decline.

The lag in depreciation of asset value means a purchase at the current market might expose owners to greater risks of making losses when charter earnings are also subdued, he said. Therefore, “the current ship trading market is still halfway through the price decline and has not yet reached the stage of bottom fishing,” he said. 

When it comes to the timing of vessel purchase, the operating cost, financing cost, charters, and the residual value of ships all should be taken into consideration, said Liu. Even when shipowners have long-term charters signed with high charter rates, they still need to pay attention to the fulfilment of the contract, Liu stated, emphasising that some small charterers may not survive a sluggish market.

Therefore, he suggested that shipowners should seek charter deals with major charterers during a weak market to reduce risks. He emphasised that although there have been lucrative profits from ships in recent years, they were driven by an imbalance in supply and demand caused by unexpected multi-crises, such as the pandemic and the Russia-Ukraine war, which are “unpredictable and non-replicable”.