Shipping Market Timing is Everything

“Operating a ship is the unfortunate thing I have to do in between buying and selling her.” –– Anonymous Greek Shipowner

At first, this saying may seem a little glib, but the math bears it out.

There are two sources of return on a shipping investment:

1. Earnings from operating the vessel and transporting cargoes; and

2. Gain from selling a vessel at a higher price than what you paid to buy it.

Let’s examine the investment returns from buying a 10-year-old Panamax bulk carrier, operating it for a year, and then selling it.

In the years where this is a profitable strategy (which is 15 out of the last 25 years), we see that:

• 39% of the return comes from vessel earnings; and

• 61% of the return comes from executing a profitable asset play.

When buying low and selling high account for the majority of returns in an investment, market timing is everything.

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