Speculation among Greek maritime giants

October 20, 2024

In a decade when the global shipping industry has experienced turmoil and great changes, Greek shipowners have attracted attention with their bold investment stance, which may affect the future direction of global trade.

Here, we examine speculative investments by Greek maritime giants and the key factors driving these unprecedented investments in gas ships and offshore assets.

Ship values soar in the 2020s

According to World Bank research, the unprecedented disruption to liner shipping in the 2020s brought unprecedented benefits to the industry. Research points out that there is a clear correlation between detained 20-foot standard container (TEU) capacity and the Shanghai Container Freight Index (SCFIQ) spot freight rate: for every 1 million TEU detained, freight rates increase by approximately US$2,300.

This year's severe drought in Panama, the collapse of the Baltimore Bridge, unusual hurricanes in the Atlantic Ocean and the mid-term crisis in the Red Sea have further supported the continued high prices in freight, rental and second-hand ship purchase and sale (S&P) markets.

As a result, the market value of five-year-old neo-panamax container ships has increased by approximately 46% compared with January 2023, with buyers paying approximately $140 million for rent-free tonnage (that is, tonnage excluding leases), which That represents a price surge of about $44 million in 20 months.

Offshore work and other sectors see rising prices

Not only container ships, but other types of ship prices have also increased significantly. The value of five-year-old large auxiliary work vessels (AHTS) and large platform supply vessels (PSV) increased by approximately 97% and 67% respectively during the same period due to smaller order volumes (approximately 2%-3%) .

The standard of ship prices may be the reason why CapitalGroup, a subsidiary of Marinakis, "expects a strong offshore industry in the future. Under this market expectation, Capital Group paid US$180 million to purchase 4 PSVs at Fujian Mawei Shipyard in June this year, and With repeat options, two more Multi-Purpose Supply Vessels (MPSVs) were subsequently ordered in September.

In comparison, the value of five-year-old Capesize bulk carriers has increased by 52%, while the value of five-year-old very large crude carriers (VLCC) has increased by 17%. If this trend is If it continues in the second half of 2024, the industry may call this decade the "Roaring 2020s" and the overall upward trend in ship values will also continue.

Shrewd and well-known for their investment diversification, Greek shipowners have quietly placed bets on other emerging areas with their keen market insights, especially in the field of gas ships.

Figure 1: Five-year fixed age value of neo-Panamax container ships

Figure 2: Five-year-old large auxiliary work ship (AHTS) and large platform supply vessels (PSV) five-year fixed age price value

Greek Shipowners flood into gas tanker sector

Some $18 billion of new shipbuilding orders from top Greek companies since 2021 are for gas carriers, of which $13.8 billion for liquefied natural gas (LNG) ships, $4 billion for liquefied petroleum gas (LPG) ships.

This investment exceeds the new shipbuilding investment in oil tankers, bulk carriers and container ships during the same period, reflecting the confidence of Greek shipowners in the gas carrier sector. Among them, Capital Group’s investment is the most aggressive, with a cumulative investment of approximately US$4.7 billion in ordering projects including large-scale Various gas ship types including LNG, VLAC, MGC and CO2 ships. It is followed by Maran Gas and Evalend Shipping, which invested 3.3 billion and 3 billion US dollars. In terms of car carriers, Atlas Maritime invested approximately US$340 million to purchase 4 car carriers in 2022/23. This investment may appear particularly wise in the future when car transport capacity is insufficient. new ship prices remain high

New ship prices remain high

Shipbuilding prices have reached their highest levels since the 2008 financial crisis. The COVID-19 pandemic has triggered strong demand for container ships, driving up newbuilding prices for all ship types.

For example, Aframax newbuilding prices increased by 20% in 2021, although earnings for the year were still below operating costs (OPEX). As shipbuilding orders increase, shipyards gain the upper hand in price negotiations, causing prices to continue to rise.

Figure 3: Top Greek newbuilding ordering companies since 2021

Figure 4: Value of new shipbuilding

In addition, container ship earnings rose again this year as the Red Sea crisis extended sailing distances around the Cape of Good Hope, stimulating ordering interest in container ships.

As a result, prices for newbuildings of all types are picking up again. Although it is not expected that the massive ordering during the epidemic will be repeated, the price of new shipbuilding of container ships is expected to continue to rise in 2024 and 2025, and the growth rate will exceed that of other ship types.

- Future Outlook

Unless the profitability of container ships continues to grow, ordering demand for container ships will slow down and the total number of orders will gradually decrease. While ordering activity for other major ship types such as bulkers and tankers is likely to increase, it will be difficult to fully offset the decline in container ship ordering.

As a result, ship deliveries will exceed new orders, the total order volume will decline, and the pressure on shipyards' production capacity will also decrease, which may lead to a gradual decline in shipbuilding prices. But this process may take 12 to 24 months, so ship prices will remain at historically high levels in the short term

Asset Speculation by Capital Group

As we can see, large ship prices across all sectors are in a very high period and based on historical price comparisons, now is an excellent time to sell a ship.

CapitalGroup seized the opportunity and sold nine modern very large crude carriers (VLCCs) to Bahri in August this year for a profit of approximately US$1 billion; a similar operation was the sale of three 12-year-old Panamax container ships to Peter in March this year for US$51 million each (including charter) Doehle, last month sold five more 11-year-old post-Panamax container ships to unnamed buyers.

These transactions have brought in more than US$1.4 billion in cumulative revenue to support the natural gas new shipbuilding plan. However, the cash flow from existing sales is still insufficient. In the future, Captial The Group may sell more container ships or tankers to fill the funding gap for its gas carrier project.