Shipping may be considered as a cyclical industry characterized by trough, recovery, peak, and slump periods. “It is the maritime’s volatility that often creates opportunity for investors” (Source: Maritime Investing: An Income Opportunity, J.P. Morgan Asset Management).
The Fund Manager believes that this is the right time to invest in Shipping. The Shipping Market is currently in its 8th year of recession, which was a result of the global financial crisis triggered by the credit-crunch in 2008, combined with the shipping market’s natural downturn and oversupply of newbuilding ships entering the market after 2008. A market which has not been in equilibrium these past few years with the vessel prices being kept very high compared to the prevailing freight rates, since the majority of this very large number of shipowners who purchased their vessels at high prices refused to realize their losses and insisted on operating these vessels with negative cash flow. Only the last few months has the market begun the correction, with the prices of ships falling considerably below the historical average values and at the same time the rate of influx of ships into the market has decreased substantially, which in combination with the increased scrapping activity, is a solid indication toward the resurgence of the Shipping Market.
Moreover, historically the shipping industry has offered some of the best investment opportunities at times of economic uncertainty, and this is definitely a time of economic uncertainty. With the turbulent recent behaviour of the stock markets and other asset classes, and with interest rates at all-time lows, shipping may offer an alternative investment solution in an industry that has finally begun its market correction and appears to be close to the upturn in its cyclical trajectory.