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The case for investing in 10-year-old dry bulk ships

Photo: Marcus Hand Stamatis Tsantanis, CEO of Seanergy Maritime Holdings Corp
Stamatis Tsantanis, CEO of Seanergy Maritime speaking at Marine Money Asia
While much of the talk in the industry has been of older vessels facing problems with the upcoming environmental regulations Seanergy Maritime believes dry bulk ships in the 10-year age range present an interesting investment opportunity in the current market.

Speaking at Marine Money Asia last week in Singapore Stamatis Tsantanis, CEO of Seanergy Maritime Holdings Corp, noted the very low newbuilding order in the dry bulk sector due to the huge price differential between newbuilds and secondhand vessels as well as uncertainty over future environmental regulations deterring owners from ordering new vessels. “So that has led to a big decrease in newbuilding activity,” he said.

At the same time Tsantansis sees an effective fleet reduction in the next few years as vessels slow down to meet the requirements on the CII and EEXI environmental regulations from the International Maritime Organization (IMO) that come into force from next year. “So, overall its very positive in respect to supply.”

Asked by panel moderator Ajinkya Kadam, Head of Partnerships for Rightship, whether Nasdaq-listed Seanergy would be a buyer of tonnage in the current market Tsantansis answer as “definitely”.

“We believe that this temporary reduction in volumes has brought some very significant acquisition opportunities, and we may pursue quality tonnage in the next few months in order to replace some of the other ships,” he said.

Rather than ships in the three-to-five year old range Seanergy sees opportunities for somewhat older vessels in which efficiency can be upgraded to meet the demands of environmental regulations between now and 2030.

“We believe that the sweet spot of the market is in a bit older ships so the return on equity,  and return to investment, works better for ships in the range of about 10 years,” Tsantansis said.

“Fuel consumption is quite good, and the vessel can be upgraded by 10 - 15% more through energy performance systems, so they still have very good life in front of them. And at the time of 2030, where the big regulations will kick in, those vessels will be close to the end of their useful life.”

As a result he said it did not really make sense to pay more a three-to-five year old ship.

The investment strategy is consistent with Seanergy’s current fleet of 17 capesize vessels with an average age of 12 years.

Also speaking on the panel was Michael Jorgensen, Senior Vice President, Head of Dry Bulk for Klaveness, who noted that there were many ships that were 12 – 15 years old that would still be sailing for another five – seven years and the industry could not simply say these vessels were out of the marker but rather upgrade their environmental performance.

“So, from a purchasing perspective, I would agree, I would definitely look at that age its fantastic,” he said.