TITLE:
Why the Perfect Timing Achieved by the Managers of Shipping Companies is so Important?
AUTHORS:
Alexandros M. Goulielmos
KEYWORDS:
Perfect Timing of 8 Big Decisions in Shipping Industry, The Role of Interest Rates, The Impact of Oil Prices, Perfect Timing for An IPO, Spot Market or Long-Run One, Perfect Timing with Ages and Sizes of Ships
JOURNAL NAME:
Modern Economy,
Vol.12 No.3,
March
26,
2021
ABSTRACT: In all industries, but par excellence in Shipping
one, the timing process of decision-making, by its managers, is very important.
We analyzed only the 8 big decisions placing them in their perfect time
framework, or Perfect Timing, using historical data: (1 - 3) When to build a
vessel? At what price and of what size? (4 - 5) When to buy a vessel and at
what age and size? (6) When to be in the spot market? (7) When to be in the
long-run (time-charter) market? (8) When to float (place an IPO) and why? The 8
big decisions had also 8 serious costs: (1) the capital and financial cost
(interest, etc.). We showed the difference of borrowing at the 3-months,
6-months and 12-months LIBOR. We found-out that the rock bottom prices in building and buying ships are preferable than borrowing at rock bottom
interest rates. We showed that economies of scale in new buildings, in
particular, is a good thing provided analogous cargo exists. The dilemma of acting
in spot or time charter market, is like playing in a roulette. For a
conservative shipowner with bank loans, a time charter is preferable, but high
profits (as well high losses) occur in the spot market. There are also
economies of age of used ships near the latest technology (within 5 years of
age). We showed how prices/costs change for every year of lower age and
for every ton of larger size. We mentioned cases where bad
timing was detrimental for the existence of a whole shipping company. A
more novel contribution was to reveal when is the perfect timing for an IPO,
using the proper net asset value-NAV.