A gasoline tanker fetches $26.4 million, a drop of 7.3 percent in the past year and 51 percent from the peak in 2008, according to the Baltic Exchange in London.
“Since we did not need the money we declined to take the dilution” of ownership, Ross, whose company manages $7 billion, wrote in a March 31 e-mail. “We believe our entry prices are low and that we are now in an upturn so we are comfortable with our investment.”
Supertankers got a boost as the 48 percent collapse in oil prices since June stimulated demand, with rates rebounding to an almost four-year high at the end of 2014. Still, daily rates for the ships, also known as very large crude carriers, are now $39,548, compared with $148,000 in 2008.
Rates to hire carriers of liquefied natural gas, once a bright spot in the slumping industry, are now the lowest since 2010 as new vessels joined the fleet before facilities to export the fuel were finished, according to data from Poten & Partners Inc., a New York-based shipbroker. The Baltic Dry Index, a measure of costs to ship iron ore, coal and grains, reached a record low in February.
Bigger Companies
With shipping IPOs struggling, Evercore’s Friedman, who has advised shipping companies including Overseas Shipholding Group Inc., Golar LNG Ltd. and Torm A/S, forecast that investors could end up combining their fleets into bigger companies. Ross, who made his fortune betting on out-of-favor industries, has also predicted that private equity’s increased role in shipping would lead to consolidation.
“In shipping, you make a modest return from operations over a whole cycle if you are in the spot market,” Ross said in the e-mail. “But you make your real money if you have timed the cycle correctly in terms of purchases.”
Freight rates collapsed with the global recession in 2008, leaving behind a glut of vessels. Demand growth for commodities including iron ore and coal trailed some investors’ expectations as China slowed and Europe weakened. Meanwhile, private capital contributed to new orders, anticipating a recovery.
As Friedman, sticking to his Hotel California storyline, put it during his Nov. 12 presentation at the Plaza Hotel, “We are all just prisoners here of our own device.”