Newbuilds versus secondhand vessel prices
With faster deliveries and vessel employment, secondhand vessels tend to reflect industry participants’ expectations for medium-term fundamentals. This is unlike newbuilds—two years for delivery is mandatory. As a result, this trend suggests that secondhand vessel prices tend to be more responsive to changes in current rates. Since buyers and sellers are more medium-term thinkers, they’re more responsive to industry turnarounds—compared to newbuilds.
Secondhand vessel values
In January 2015, five-year VLCCs’ (very large crude carriers) prices increased to $80.7 million—from $77.1 million in December 2014. This is the highest level since August 2011. It’s much higher than the post-boom trough of $55 million in mid-2013. Ten-year VLCCs’ prices increased to $52.8 million—from $52.1 million the previous month.
Suezmax five-year prices stood at $59.7 million—compared to $56.8 million in December 2014. Aframax five-year and ten-year vessels stood at $45.6 million and $31 million, respectively—compared to $41.9 million and $26.8 million, respectively, in December 2014. In January 2015, Panamax five-year vessels increased to $35.8 million—from $33.4 million in December 2014.
Vessel price appreciation
McQuilling Services noted that VLCCs and Suezmax tankers may offer investors a more attractive risk-adjusted return in the long term. It also added that the ten-year tankers of these two vessel classes will outperform their younger counterparts. Asset prices for these vessels recorded a growth of 21.2% and 44.9%, respectively, in the past 12 months.
McQuilling believes that the upward momentum initiated during 2015 will continue forward as the current firm earnings environment persists at a stable rate during the current year. It will retreat slightly in 2016 before firming again through 2019.
Companies are trying to benefit from rising values for secondhand tankers. This is underpinned by soaring freight rates in the sector amid falling crude oil prices. Tanker stocks—like Teekay Tankers Ltd. (TNK), Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), and Frontline Ltd. (FRO)—and the PowerShares DB Oil Fund ETF (DBO) are estimated to be in the positive for the upcoming few months.