While we are all aware that this period of unprecedented peacetime crisis is far from over, as we in the UK ‘return’ to work after the Easter holiday weekend, and news comes from mainland Europe of the tentative easing of restrictions of movement, it seems an opportune time to evaluate the opportunities that may exist within our market in the months to come.
In a recent interview with Exponential View, Head of Global Technology Infrastructure Research at New Street Research, Pierre Ferragu highlighted the profound difference between this economic crash and those before it.
Referring to ‘orthodox’ market crashes, Ferragu explained, “you are in a situation where you end up having too many investments and you have oversupply, not enough demand and things collapse… when you reach the bottom of the crisis, you need to rebuild capacity to drive growth again.”
Contrastingly, the current situation’s unique dynamic is one where, “we actually [had] an economy running strongly, but on a fairly healthy basis that suddenly stops…but capacity is still there. So, we don’t know how we get out of that.”
While the unprecedented nature of this trough makes it hard to see any light at the end of the tunnel, the matter of ‘capacity’, to which Ferragu referred, is a cause for optimism among our industry.
The two market dynamics to consider in this context are the physical manufacturing process and buyer appetite, and both have a profound impact on capacity.
If we take capacity to be the availability of project slots at both new-build and refit yards, and the supply of inventory in the sales and charter markets, it is currently being hindered by the physical restrictions on movement and trepidation on the part of buyers/charterers respectively. The impact on our industry is felt all the way through the supply chain, as business grinds to a halt.
But where there is adversity, there is also opportunity. It has been well documented by the financial press that there will likely be a rush on stock purchases as soon as the first signs of economy recovery emerge. And it is fair to say, a tertiary effect of this will be spending on the part of those who inevitably profit from the market’s rebounding.
And this is where capacity comes into play. Because a market emerging from a trough also weighs heavily in favour of the buyer, and that in itself represents an opportunity.
On the day this article was published, Australian shipyard Echo Marine Group issued a statement to the industry highlighting its own capacity to undertake both new-build and refit projects, citing the opportunity the current situation represents for clients.
‘We are pleased to report the Australian Dollar has weakened significantly against the USD and Euro in recent months.
‘This ~20% increase in buying power provides a very special opportunity for foreign buyers considering a custom newbuild, or for owners, captains and fleet managers considering where to perform their next refit or shipyard maintenance visit. Australian buyers can also benefit from this great Echo Marine Group option rather than paying a large premium for vessels built in Europe with their weakened AUD buying power.
‘This is the perfect opportunity for smart buyers and brokerage firms to invest in Australian Made and realise a safe and attractive opportunity with Echo Marine Group.’
As national governments begin to relax lock-down legislation in the coming months, there will be myriad cases like the one outlined above, and this in turn will manifest a market rich in competition and opportunity. And while it is still some way off, it does represent a light at the end of the tunnel.
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