ARVES Vessel Valuation Department provides the financing institutions, private companies, leasing companies and public institutions with the quality valuation services at home and abroad for the valuation of all types of vessels, yachts, boats, submarines, floating establishments and platforms, with its professional and sectoral experience. As a result of the field work, the legal status of the vessels valuated on-site is investigated in the relevant harbor master’s office, and it is researched whether or not there is a commercial enterprise pledge record. The necessary information with respect to the valuation of the vessels is obtained by examining the machinery manufacturers and the second hand trading markets. The documents obtained from the company are examined and the necessary analyzes are performed. As a result of the table study, and a report is prepared through valuation as a result of some valuation methods by taking into consideration the general condition, age, class, tonnage, surveys, boat structure and properties, condition and capacity of the cranes, condition and capacity of the machinery rooms and equipment, outfits, life-saving and fire equipment, condition of warehouses, capacity of the warehouses.
CONDITIONS AFFECTING THE VALUE OF VESSELS AND METHODS TO BE APPLIED
As of the date they are obtained from the shipyard, the financial values of the commercial and passenger vessels cease to be the value of iron and equipment used for their construction, and become part of a multivariate equation that is shaped according to the economic trends of the day.
The parts of this equation vary according to the port of the vessel at that moment, the course of the trading markets, the supply-demand balance of the cargo to be carried by the vessels according to its type and tonnage, the flag of the ship, and the financial power of the shipowner.
Determining the value of the vessel shall ensure that the commercial vessel shall be bought at the right time at the appropriate price, and sold at the right time by evaluating the opportunities in the maritime markets. In addition to the operation of the vessel, this concept shall have a positive impact on the commercial activities of the vessel by ensuring a serious income.
The aim of this paper is to determine the factors affecting the value of the vessel and to determine the long-term values of the vessels by analyzing the relationship of these factors with each other digitally. Although the short-term vessel prices are inconsistent within the legal financial balances, they shall ensure to determine a lower level based on the determined long-term value of the vessel.
How much?
Freight rates that have been on the rise since 2002 yielded enough to cover the buying cost of a vessel that was bought 5 years ago as a freight input in a single year in 2007 and 2008. This yield rate caused that many non-maritime sectors aimed to make profit by buying vessels, and therefore the vessel prices rose to such levels that are much higher than the shipyard costs as a result of the demand boom led by the high amount of money coming from outside the sector.
Baltic Bulk Index The Index Chart for 2000-2009
A bulk carrier of 50 thousand tons built in 1997 that was bought against $8.7 million in 2002 provided an annual freight income of $13.6 million with an average daily income of $40,000 in 2007. The same ship that was 10 years old at that time had a market against $26 million.
Average Sales Price (Million Dollars) on the Selected Dates
Having gone downhill in the first months of 2009 in parallel to the international economic crisis, the freight rates caused sharp decrease in vessel sale-purchase prices, and the vessels’ gains started to cover the depreciation costs in a period of 10-12 years. The vessel prices started to decrease due to this development.
Factors Affecting the Value of Vessels
In order to measure the value of a vessel, it is necessary to examine the relationships between various external factors. These external factors can be listed as follows:
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The daily average of the vessel freight return
Average daily income of the vessel as of the year of buying (T/C return)
Future freight estimates.
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Age of the vessel
Remaining economic life
Restrictions on class and flag/port state rules, the effect of these restrictions on freight return.
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Operational costs
Daily operating fee
Repair and pool costs
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Finance costs
Pursuant to the vessels debt
The following formula can be accessed by using the mathematical connection of the above data and the discounted cash flows method to achieve a value.
Definitions:
VLTV= Vessel Long-Term Value
Kz = daily average net T/C return of the vessel in the past 8-10 years, if possible. (if it is not possible, the values achieved in a shorter period or the existing values can be used)
Mz = daily average net T/C return of the vessel in the past 8-10 years, if possible. (if it is not possible, the values achieved in a shorter period or the existing values can be used)
k = variable value generated by the market analysis.
z = time interval in which Kz and Mz values are calculated
Z = The remaining economic life of the vessel.
AD = Depreciation Value
The first part of the formula is formed to calculate the return that shall be achieved over the remaining economic life of the vessel by reducing the daily operating costs of the vessel from the daily freight return thereof achieved in the past time, and by proportioning the value found to the variable “k” according to the market analyzes obtained from the reliable indexes such as Contex, Baltic Bulk Index.
In the second part of the formula, the value achieved by portioning the scrap value of the vessel to the variable “k” refers to the scrap value of the vessel at the end of the economic life thereof.
For the variable “k”, it shall be appropriate to use the rate of loan interest that can be taken for the remaining economic life of the vessel in that country, including the current situation and future estimates of the economic markets of the country where the vessel is traded and the shipowner operates. Although there are various differences between companies and banks as of the end of 2009, the following loan rates are applied in our country by adding 2-3% local bank commission to LIBOR (London Interbank Exchange Rate).
|
|
5 years |
10 years |
15 years |
20 years |
|
LIBOR + 2-3% local bank commission |
6 |
7 |
8 |
8.5 |
The sum of these two types of values achieved for the remaining economic life of the vessel shall represent the vessel’s long-term value.
Conclusion:
Accurate calculation of the values of the vessels shall increase the value that the shipowner shall add to the national economy by making the right decision when making decisions in its commercial activities. Offering to the national economy the freight returns of the vessels as well as the income that can be obtained through the trading prices to buy new vessels and extend the existing fleet shall have positive impacts on the maritime sector as much as each company and individual within the sector.
In addition, appreciating the value of the Turkish Mercantile Fleet both with Turkish Flag and with foreign flags shall emphasize the importance of this sector, and lead to the increase of the laws and financial opportunities that are desired to be developed in this regard.