Why the Perfect Timing Achieved by the Managers of Shipping Companies is so Important?

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.