BusinessWeek: How to Buy a Supertanker

“How to Buy a Supertanker, By Michael Tusiani: Shipping is not for the fainthearted. Those seeking roller-coaster thrills need look no further than the nearest tanker acquisition. While strong returns on investment are far from guaranteed, those with a sixth sense in reading market demand and timing and those with a nose for anticipating their opponents’ moves can do quite well in the tanker asset game. The first step is to understand market fundamentals. The market’s highly cyclical nature is not just a result of trying to match worldwide oil demand with vessel supply. For example, while global oil consumption increases over time, the cost of building a new VLCC (very large crude carrier) of 300,000 deadweight tons has decreased from roughly $150 million four years ago to $95 million today. However, wild cards could have a far greater influence on freight rates. Threats of conflict or actual war, canal or waterway closures, new legislation in different countries, and the role of alternative fuels must be considered. Then try to understand the psychology of ship owners and other players. Each has a unique personality and business style, with special relationships that provide varying insights into the possible timing of the market. Lastly, don’t try to predict the market bottom. Regardless of when you buy, if you are well capitalized you can enjoy modest returns over time. But you must secure your seat belt—and enjoy the ride. — Tusiani is CEO of global brokerage and consulting firm Poten & Partners.”