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WIKI ANALYSIS
Seaspan owns and charters containerships. The company makes money by entering into long-term, fixed-rate charters as well as seeking additional accretive vessel acquisitions over the mid to long-term. The company operates roughly 55 vessels with an average age of about 4.9 years.[1] In recent, the company has increased its exposure to China by purchasing a significant number of newbuilding containerships constructed by Chinese shipyards.
Business Growth
Seaspan persists operating performance through the number of long-term charters and the fixed-rate charged to those transactions. A time charter is essentially a contract for the use of a vessel for a fixed period of time at a specified daily rate. Under a time charter, the vessel owner provides crewing and other services related to the vessel’s operation, the cost of which is included in the daily rate; the charterer is responsible for substantially all of the vessel voyage expenses, such as fuel (bunkers) cost, port expenses, agents’ fees, canal dues, extra war risk insurance and commissions.[2]
Trends and Forces
SSW Operates in a Capex Intensive Industry that Favors Newer Vessels
SSW operates in an industry that is highly competitive, where newer fleets tend to receive more business due to reliability. Further, older ships require more capital expenditure and are also harder to estimate. Finally, in lieu of changes in government regulation, compliance with customer requirements may force SSW to alter or add new equipment. In this regard, SSW's average age of all vessels is approximately 5 years, but will need to continue to operate newer machinery to sustain its business.
The Amount of Revenues for Shipping is Highly Dependent Upon Demand on Goods Shipped
The demand of goods shipped is often illustrated by the Baltic Dry Index - BDI (BALDRY). In recent times, while there was disagreement in the industry over whether demand would keep pace, with world economic growth slowing down, there is little doubt that if all new shipbuilding orders were completed there would be an oversupply.[3] As such, because the number of ships cannot be easily corrected for demand of goods shipped, an oversupply of ships immediately means a decrease in revenues. The shipping industry which SSW operates under would immediately be affected by this situation, and therefore is highly correlated to the index as shown below.
Competition
ISH competes with other international shipping service companies such as:
- International Shipholding (ISH) operates a diversified fleet of US and international flag vessels.
- Diana Shipping (DSX) specializes in transporting dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes.[4]
- Genco Shipping (GNK) transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes.[5]
References
- ↑ SSW FY2010 20-F, Pg 60
- ↑ FY2010 20-F, Pg 35
- ↑ Diana Shipping Trends and Forces
- ↑ DSX Business Description
- ↑ GNK Business Description
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