Interview: Ship Value in Almost All Sectors Close to Historical Lows

In May 2011, the mapping, ship search and valuation provider, VesselsValue launched its business operation, introducing a new approach to vessel valuation coined the quantitative analysis.

The catalyst for the establishment of the company was the 2008 financial crisis, when a slump in ship sales forced ship brokers to declare that with no “last done”, the market was illiquid, and therefore ship values could no longer be given.

VesselsValue CEO, Richard Rivlin, together with his brother, Christopher, a professor of mathematics, built the first version of VesselsValue in Excel. However, as the complex multi-regression analysis required a new approach, Ben Durber and BB Solutions were brought in to develop the model and the website, which went live on Friday 13^th May 2011.

Five years later, VesselsValue has provided over one million valuations and has expanded into container shipping, dry bulk cargo, small tankers, LNG and LPG markets, among others, and most recently the offshore market.

World Maritime News spoke with Mr Rivlin on the occasion of the celebration of the company’s fifth birthday to find out more about the experiences so far along with the way forward.

WMN: Looking back at the past five years, what would you say have been the major accomplishments and challenges in VesselsValue’s journey since its establishment?

Rivlin: The key milestone after the launch on Friday 13^th May 2011, was the decision to open the Isle of Wight office, which is dedicated to research and analysis of the shipping and offshore fleet. Therefore, VesselsValue has developed its own unique database. With 30 people doing pure research we have been able to add historical values of ships, different ship types, new types of values, including DCF and launch VV Offshore.

WMN: What would you say has been the key to your success over the past five years?

Rivlin: In ship broking, the owner is often the client, not the bank. The key to success has been to listen to our clients, two thirds of which are in the financial sector, and provide them with the tools they need.

WMN: VesselsValue is a pioneer of quantitative analysis for the shipping industry. Could you explain to our readers the main advantage of such an approach to vessel valuation and what it has brought to the industry?

Rivlin: The advantage of our approach is mathematical, with a heuristic touch through valuation analysts input into the artificial intelligence model. Our analysts sit next to the ship brokers of Seasure Shipbroking, the sister company to VesselsValue, and are constantly listening to the market. As for advantages, there is no waiting for a broker to decide a value. The values are instant and consistently repeatable.

WMN: In a world driven by information technology and the Big Data, how can vessel valuation help the shipping industry be more transparent and reliable? How reliable is vessel valuation for that matter?

Rivlin: Our methodology has been approved by the risk analysis and compliance departments of the major banks in ship finance, who until the launch of VesselsValue were only valuing vessels twice a year. With VesselsValue the same ship can be valued in a consistent manner at any time, and we are the only valuation providers to offer an accuracy report of our values. By checking the value of a vessel the day before its sale we are able to measure and improve the accuracy of our values in line with daily market movements.

WMN: How difficult is it to determine a ship’s value and what factors are to be considered in the process? What sectors have been hit the most in terms of ship value at the moment?

Rivlin: We have determined that there are five factors that determine the value of a vessels– the type of ship (tanker, dry bulk and so on), the features (size, shipyard, flag), age of the ship, the freight earnings and most importantly the recent S&P activity for that ship type.

Nearly all sectors are close to historical lows, except for tankers.

WMN: Taking into account the overall situation in the maritime industry, especially the headwinds in dry bulk and container shipping, along with the offshore sector, how would you describe the role of vessel valuation? Who are the key beneficiaries interested in this particular service?

Rivlin: Ship finance is still largely “asset financing”, that is, the ship provides the collateral. If the buyer of the ship is unable to make payments, the bank has the right to sell the vessel to pay off the loan. Therefore, it is vital to know if the loan conditions are being breached by the value of the vessel falling below an agreed limit. The banks, investors and owners all benefit from knowing the current value of the vessel.

WMN: How has the industry slump affected the interest in vessel valuation data from the financial sector, seeing that banks have been hit hard by bad loans?

Rivlin: The finance sector sees this service as absolutely vital. Under the new Capital requirements legislation, it is vital for banks to know the position of their loans, and which loans are under-water.

WMN: Seeing that VV Offshore has been launched this year, what are the key goals/expectations for this sector?

Rivlin: VesselsValue launched in 2011, when the shipping market was in a slump, and it was assumed that ship values could not go any lower, but they did. There are now parallels with the offshore market, with owners in denial about the amount their vessels have fallen in value. Many of our ship finance banking clients are lending to the offshore sector, and they have signed up to the new service. It will take a while, but we expect the offshore vessel owners will subscribe to VesselsValue, too.

WMN: For a company to grow, it is crucial to monitor the market. What has been the driving force behind your expansion and in which markets do you see potential for further growth?

Rivlin: For the time being, VesselsValue will enjoy organic growth as it expands the range of vessel types in the deep sea shipping sector and the offshore sector. However, we have several other exciting projects under development. Watch this space!

World Maritime News Staff; Image Courtesy: VesselsValue