Newbuilds versus second-hand vessel prices
Since second-hand vessels can be delivered within a few months, they tend to reflect industry participants’ expectations for medium-term fundamentals and rates, unlike newbuilds, for which two years of delivery time is mandatory. Second-hand vessel prices tend to be more responsive to changes in current rates.
Second-hand vessel values
Five-year-old VLCC prices in October 2014 remained consistent at $75 million from the previous month’s levels. Ten-year-old VLCC prices, however, increased to $50 million from $48 million in the previous month.
Five-year-old Suezmax vessel prices in October 2014 increased to $54 million from $43 million in October 2013, while ten-year-old prices surged to $32 million from $29 million. Aframax five-year-old vessel prices stood at $41 million in October 2014 compared to $30 million last year, while ten-year-old vessel prices for the same period increased to $26 million from $20 million.
Vessel price appreciation
Since a company’s value also depends on ship prices, higher vessel prices are positive for companies’ share prices. The higher the value of these assets, the higher the value of a company’s assets.
With vessel prices recording a marginal monthly increase, tanker stocks such as Teekay Tankers Ltd. (TNK), Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), and Frontline Ltd. (FRO) could be in the positive. Also, the Guggenheim Shipping ETF (SEA) should follow suit.