Confluence: New build in g, Prices and Interest Rates

By Jerry Lichtblau of MJLF

The combination of current newbuilding contract prices and borrowing costs provide owners a, perhaps, once in a lifetime opportunity to be largely shielded from the down cycles of the market while still being able to take advantage of the upside volatility.

Cost Reduction

The level of NB prices is similar to the level that existed in 1999 (lower in some sectors not in others), which are the lowest in the double-hull lifecycle, but current interest rates are nearly 400 basis points lower than they were during the bottom of the 1999 NB market. For those with a navigational bent the comparison of 2002 with 1999 can be described that in 1999 these two factors were in opposition while conversely they are now in conjunction. In other words: (a) the stars are now aligned and (b) for those old enough to remember the play Hair – the moon is in the seventh house. This result is estimated financing costs1 being lower than they were in 1999 by:

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