Wall Street Shipping Decisions
A debate has been raging in the shipping industry for the past decade. Is it better to be a pure play shipping company or a jack-of-all-trades? As shipping companies make moves in one direction or another, their decisions make an impact on businesses that rely on time-critical shipping to fulfill orders and keep warehouses full. Here are some of the ways wall street shipping decisions
What is the Difference Between Mixed Fleets and Pure Plays?
It’s important to understand the distinction between mixed fleets and pure plays. A shipping company with a mixed fleet will own ships across multiple different segments. This means they may have vessels spanning from dry bulk, wet bulk, and box shipping. This is common for established shipping companies.
A company that is pure play will put all of its resources into one type of shipping. Again, that could be dry bulk, wet bulk, or box shipping. This is common among newer shipping companies, as it’s an easier sell. Companies often go back and forth between being a mixed fleet or a pure play.
Companies on the Move
One company that has recently made the shift from pure play to the mixed fleet is Costamare. They recently purchased seven bulk carriers, bringing their dry bulk fleet to 44 ships with an aggregate capacity of 2.4 million deadweight tons. They also own 77 box ships with a capacity of 586,000 20-foot equivalent units.
Navios Partners, a container-ship and bulker owner, completed a merger with Navios Acquisition, a crude and product tank owner. The Navios Group was once a pure play, but now has 142 vessels spanning wet bulk, dry bulk, and box shipping. Castor Maritime, a one-time pure dry bulk owner, has also begun diversifying into tankers.
From Mixed Fleet to Pure Play
While many major companies are making the switch from pure plays to mixed plays, there are still companies moving in the opposite direction. StealthGas, for example, recently spun off a separately listed entity, Imperial Petroleum. With this spinoff, StealthGas will keep the LPG ships while Imperial Petroleum takes the crude and product tankers.
Diana Shipping, a dry bulk owner, also spun off a separately listed entity, OceanPal. OceanPal will take three older bulkers focused on the spot market while Diana Shipping will remain focused on staggered time charters for new ships. Outside of new entities, Grindrod Shipping recently sold its remaining product tankers, becoming a pure play on small-size bulk carriers.
What are the Pros of a Pure Play?
There are several different pros and cons of being a pure play. The major benefit is that pure play shipping companies are viewed as more understandable and reliable. These companies understand their strengths and are typically viewed as the best option to ship whatever it is their specialization is.
One of the obvious downsides of the pure play model is that the market can be incredibly punishing. If demand in the sector collapses, these companies often have a difficult time staying afloat. This can lead to turmoil in the shipping industry, as those who once relied on these companies can no longer do so.
The Pros and Cons of a Mixed Fleet
The mixed fleet model is the traditional model across the private sector. Companies will typically buy assets at low prices when a segment troughs and sells them at high prices when that segment peaks. They then use the proceeds from the sales to buy more lower-priced ships in another segment.
The peaks in which generational wealth can be made are far and few between, usually separated by long chasms of rate weakness. If a company is big enough, it makes sense to tap into different markets, however, as you have more room for error if a certain sector bottoms out.
The Shipping Industry Can Be Confusing
If you rely on time-critical logistics to keep your business running, keeping up with what’s happening in the shipping industry can be a nightmare. That’s why our team at Trifecta Transport is here to help. We can handle your logistics needs so you don’t have to worry about keeping up with the ins and outs of the shipping industry. Please contact us for more information.