Inflated Prices for Second Hand Ships Could Face Downwards Pressure

The SnP market has been rising so far this year, both in terms of sales and prices. However, the latter could be starting to correct downwards, in the weeks to come. In its latest weekly report, shipbroker Allied said that “improving freight market conditions typically stimulates activity in the snp market, and results in upward pressure in the values of the assets as well. There are though many circumstances/market regimes where this cohesive response breaks. We can notice a solid number of sales and bullish pressure on prices, while freight figures decline, or the snp market in a state of clampdown, with price ideas remaining relatively elevated. Cause-effect connections are far more blurry in the shipping markets, creating further space for fresh arguments, i.e. snp liquidity can not always be seen as a reflection of sound freight conditions, as well as, any given strong trend to be noted in asset price levels mark usually a secular change taking place, that may extent beyond a periodical rally in buying appetite”, the shipbroker said.

According to Allied, “for the purpose of this analysis, snp activity was fragmented among the different size segments and two age categories (as shown in the bar charts). As a reference for asset values trend, we used 5yo and 15yo price curves. Starting with the graphs on the left, the connection between price and activity seems rather clear. Strong liquidity during the most part of 2022, was reflected in a rising asset price regime during the same time frame. Similarly, the slowdown in activity created a periodical stagnation in price ideas.

The only deviation was the solid Suezmax snp momentum in 23Q2, resulting in an immediate spike in price levels, that decayed though very quickly, when q-o-q activity collapsed. Moving on to the most recent snp market status quo, there was a solid improvement in volume for the past couple of quarters, after low 23Q3 market, and prices experienced a modest growth once again. A fair question is whether a liquid market can signal the next price jump, whilst moving forward. As “attractive” as it may sound, excess demand is scarce in a high price regime, however the market currently signals the adequate fundamentals to retain solid support levels, while exhibiting fairly small downside risk.

“Measuring the potential in the overage fleet arena seems like a challenge at this point. The quarter average levels for 3 consecutive quarters (excluding the jump in VLCC during 24Q1), may have already signaled some form of ceiling (or state of maturity) in both price and buying interest. Beyond some short-lived revivals and speculative movements, pressure will eventually emerge and may be not so distant a date. On the contrary, the favorable view in terms of fleet growth potential, can protect the seeming “inflated” numbers in the modern assets in the meantime”. Allied’s analysis concluded.

source : hellenicshippingnews