Massive of amounts of data are now being made available to shipping industry participants. Much of the data is, of course, proprietary, related to performance of equipment and particular items of kit. When properly assimilated, performance of vessels (usually defined in terms of energy efficiency) can be measured. As the measures begin to track KPIs like carbon neutrality, it is hard to imagine such data remaining proprietary. But this week’s article looks at data much more interest to observers of freight markets, to financial teams at individual companies, and, where applicable – to investors or other providers of funds to maritime businesses. Data on various cost items, and – potentially revenue earning capabilities, can be the grist for fresh analytical approaches.
The Baltic Exchange, based in London, is producing something like something like 180 different indices and assessments- mainly daily hires and voyage freights, over a panoply of bulk carriers and tankers. Financial investors can take views on shipping markets; while ship operators can manage the revenue side of their business. In a recent webinar, the Exchange explained ongoing efforts to enhance measures of operating costs – in an effort presently under development. Importantly, crewing – a hot button issue, is the subject of increased scrutiny. As “repatriation” costs increase, crewing costs are likely to rise; with measurement, the often emotional dialogue on this issue can be infused with more objectivity.
Another webinar, this one produced by Capital Link, highlighted a new effort by the accounting firm Moore Greece (a top accounting firm serving numerous shipping clients) taking anonymized company financial data as an input, to then produce metrics of company performance. While, there has been considerable attention placed on algorithmic approaches to forecasting shipping markets, Moore’s effort is not about predicting the markets’ ups and downs – rather it is about looking at actual operating cost accounting metrics across a broad swath of companies, allowing for observation of trends.
As explained in the late Spring, 2020 Moore Maritime Index report, Shipping trends based on the fleet size, the firm’s initial focus was to search for patterns, more properly described as “…correlations between operating expenses, net income, vessel age, capacity and fleet size…” in the tanker and bulk carrier segments. The report’s authors explain that “Collected data comes from more than 150 management companies which manage more than 1,500 vessels globally…” and that their data is grouped by fleet sizes: 1-5 vessels, 6-10 vessels, 11-20 vessels, more than 20 vessels. Importantly, “benchmarking” implicitly asks the question of “How does my fleet’s performance compare against the larger universe of comparable vessels?”
The Moore Maritime Index (MMI) project, in an expansion mode, already uncovered information that does not comport with the “conventional wisdom” (expressed in gossip and hearsay) of “bigger is better.” As pointed on the call by Nicolas Bornozis, from Capital Link, companies with greater market capitalizations (and bigger fleets) have access to capital markets, while their smaller compatriots might not. However, detailed measures of the cost side of the business have thus far escaped rigorous scrutiny by sell-side and buy-side analysts. And, on standardization, don’t get me started….
A few patterns emerged in the Moore dataset (using 2018 data from 150 management companies controlling more than 1500 vessels), for both the tanker and drybulk sectors. Across the board, “there is strong evidence that management companies with big fleets tend to manage younger and larger vessels.” In the words of Mr. Costas Constantinou (who captains the Moore project). Also, from the dataset, he suggested that “…bigger fleets seem to be able to earn a higher time charter equivalent…” though the revenue side may need a lot more work to correct for various factors. That data presented to webinar viewers indicated that, in both wet and dry sectors that crewing costs, and “administration” costs, expressed in $/day/vessel, increase as size of the fleet increases. Back in the day, a ship manager buddy told me that above 50 vessels, the $ cost/ vessel/ day would start to climb. Based on my quick peek at the Moore data, the “magic number” might well be half.