Seatrade Maritime is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Diversification is good, but shipowners also need to understand the risks

Diversification is good, but shipowners also need to understand the risks
Diversification is good for shipping companies but only if companies understand the reasons why they are doing it and the risks involved, according to leading shipping executives speaking at Nor-Shipping 2015.

Leon Patitsas, founder and ceo of Atlas Maritime: “If you diversify you definitely reduce your risk and you enhance your return because the different sectors are not moving at the same pace and are not correlated so if you have dry exposure, wet, gas and offshore at sometime one of the sectors is going to be doing better than others.”

However, two leading shipowners warned of the possible pitfalls in diversification.

Angeliki Frangrou, chairman and ceo of Navios Group commented: “I think diversification is important but you have to understand the type of diversification. If it is a grain house going into shipping it doesn’t make sense its really a cost.”

She noted that to be a successful shipping company you need to control costs which means economies of scale. As Navios has done Frangrou said companies can use the brand name across different segments such as crude tankers, bulkers and containers.

However, for investors to understand the companies, “This has to be in separate companies with some kind of holding, the have to be in a separate structure.”

Meanwhile Yngvl Eriksson Asheim, managing director of BW Shipping highlighted the need to understand different types of financing that can come with diversification. “It’s all about understanding the risks you are taking with different approaches with different segments so you can diversify and you can tap into a number of financial sources,” she explained.

“But you have to understand, for instance private equity what sort of risk you are taking on if you tap into that kind of financing, it’s totally different from a long term shipowner.”