DryShips goes for bigger vessels, Excel for older ones
NEW YORK – Shipping company DryShips Inc is targeting larger vessels for acquisition and seeking to sell off older ones while the demand for ships is so high, the company’s top executive said on Friday. «We’re selling older vessels for higher prices that we wouldn’t be able to sell off in a down market,» Chief Executive Officer George Economou told Reuters on the sidelines of a maritime conference in New York. «We also want to get out of the smaller (vessel) sizes and stick with the larger classes,» he added. «We’re not happy with the smaller ones and think the larger classes make more economic sense for us.» The company is avoiding ordering new vessels and is instead looking into used ships as the sale price of a new bulk carrier is just too high, Economou said. Dry-bulk shipping rates have been pushed up and have remained higher for longer than their usual cycle by rising demand for bulk commodities like coal, iron ore, steel and cement from developing nations such as China and India. Although he predicted strong, if volatile, shipping rates over the rest of the year, Economou said DryShips will look into opportunities to move from the spot market to long-term charters – revenues are fixed under charter – if freight rates were to fall significantly. Athens-based DryShips has a fleet of 34 ships. Earlier this week DryShips announced it was buying two large ships built in 1997 and 2000 and selling one large ship built in 1988 and a smaller Handymax class ship. Economou said DryShips is not happy with the Handymax class and is looking to buy used Capesize ships, the largest class of dry-bulk carrier. «Unfortunately, not too many ships of that size change hands, so we are also looking out for Panamax class ships,» he said. Panamax ships are the class below Capesize vessels. Excel Maritime Separately, dry-bulk carrier company Excel Maritime said it is looking to acquire secondhand ships instead of new ones to expand its fleet due to better returns on older ships. «We did not make any acquisitions in 2006, and we are ready to purchase some ships this year,» the company’s chief executive, Christopher Georgakis, said in an interview at a shipping conference in New York. The company went on a buying spree in the first quarter of 2005, acquiring 16 ships in a short span of a few months, but the company went into consolidation in 2006. Excel currently owns and operates 10 Panamax and seven Handymax vessels, with a total carrying capacity of about 1 million deadweight tons. To execute the ship purchase plan, the company has a balance sheet of about $100 million. «We will be looking for secondhand ships of about five to seven years old,» he said. Although Excel is the owner of Handymax and Panamax vessels, Georgakis said that the company will look to acquire Capesize ships as well. Capesize ships also provide the best returns under current market conditions due to a higher volatility in that market, Georgakis said, dispelling the market perception that new ships earn more than older vessels. Modern ships might secure higher charter rates in the market, but older ships have better returns due to lower ship asset prices, he said. Excel’s average fleet age is higher than its peers, such Eagle Bulk Shipping, at about five-and-a-half years. Besides acquiring ships to expand its fleet, Excel also aims to lower the average fleet age. «Our average fleet age in 2004 was 25 years old, and is now 13.9 years,» he said. «We will bring it down to 10 years.» Excel has about 70 percent of its fleet on long-term charter contracts, helping to stabilize the company’s annual earnings.
