Periods of ownership in shipping : patterns and influences

Abstract

In modern shipping the use of sophisticated investment valuation tools is not the rule but the exception and investment decisions are often based on the useful economic life of the asset, which can be misleading. The purpose of this research is to investigate periods of ownership in shipping based on evidence from the commercial history of vessels built between 1987 and 2007 in order to determine the likely investment horizon for a vessel owner. The research aims to provide an insight into the strategies and practices adopted by shipping professionals in terms of sale and purchase policies of assets. This will facilitate marine service and equipment providers, such as sale and purchase brokers and retrofitted equipment and systems manufacturers, in targeting customers. The analysis incorporates ship and company level characteristics as well as economic indicators and is focused on the three main ship types – bulk carriers, tankers and container ships. In order to fully address the nature of the data on periods of ownership, also known as time-to-event data, a variety of statistical techniques used in demographical studies and in biomedicine have been employed to: (i) describe patterns of ownership in shipping; and (ii) establish whether certain characteristics at the ship and company levels as well as economic indicators influence periods of ownership. Furthermore, in depth interviews with shipping professionals were also conducted to provide further insights. In this research the commercial records of 3,908 vessels of 30,000 dwt and above have been examined resulting in 8,042 changes of ownership recorded. Data on 1,125 companies has been gathered based on the ownership history of 2,000 vessels from the sample. The results reveal that different sets of characteristics affect the decision for a ship to be sold by each owner in the succession of owners comprising the commercial history of a vessel. The most likely scenarios for the economic lives of vessels are identified and analysed based on ship and company characteristics.