Cargo ship investments

COMMODITY PRICES

A number important aspects of ships determine their worth and viability as investments.

Depending on investor preference, some factors may outweigh others. Such factors then have the potential to considerably sway the investment decision to- or away from certain types of ships.

As a rule, commodity prices do not affect the freight rates for the vessels that carry them. The only exception may be in cases where oil is carried as a commodity.

For oil tankers, the oil price is not only important in terms of its effect on daily ship operating costs. For these vessels, it also increases the volatility of the ship as an investment.

This is especially true in cases where the ship can not transport any other materials.

CARGO

It is quite reasonable to expect commodity prices to affect the shipping finance business.

This is, however, more true from the perspective of ratios such as commodity value per cubic meter or commodity value per kilogram.

These kinds of relationships influence entire supply chains and logistics strategies. They affect the choice of vehicle and route used in the transport segments of logistics systems.

Shipments that have high value per kilogram or value per cubic meter ratio's are generally more likely to be transported by airplanes than by ships.

These are also more likely to be moved around via direct routes as opposed to through hubs.

PRODUCTS AND PACKAGING

New technology is changing the way that products are packaged and the choice of transportation. Packaging affects the value/weight or value/volume ratios and the ability to transport in containers.

The difference is especially apparent when viewed from the perspective of making a comparison and distinction between vessels designed to carry containers and those designed for dry-bulk cargo.

CONTAINER SHIPS VS. BULK CARGO SHIPS

The prices of goods that are carried in a given vessel designed for dry-bulk goods may generally be more volatile than the goods carried on a container ship of a similar size.

Container ships generally carry a very wide variety of products and materials. Such products and materials may be in various stages of production and originate from many different places in the world.

A container ship may, for instance, carry one or more containers of relatively raw materials such as wood or rice.

At the same time, however, it may also have containers filled with finished goods such as refrigerators and camping equipment.

Ships that carry large quantities of the same substance such as iron ore, wheat, corn, or oil, generally experience higher volatility in freight rates. This is because the freight rates for these ships are highly dependent on a small group of commodities. In some extreme cases, they may even depend on a single commodity.

When the price for that commodity changes, the freight rates change exponentially. It can be deduced then, that the less types of cargo a vessel can carry, the higher the volatility in freight rates will be.

RISK

One of the most important implications regarding vessel type in terms of cargo lies in risk. When something goes wrong on a bulk carrier, the fault can affect the entire shipment or at least the cargo in one hold very easily. Because container ships compartmentalize goods, the chances of a problem spreading are much smaller.

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