“The time has come to enlarge our fleet”
How has MC-Schiffahrt started the New Year? How important is the entrepreneurial size in shipping? What do partners expect from their shipping company?
CEO Mad Dabelstein talks in an interview about new alliances, his expansion plans and possible investment opportunities.
Question: We have the springtime of 2018. Shipping is still a difficult industry. How is MC-Schiffahrt doing in the competitive environment?
Mad Dabelstein: Others can give up, we keep on fighting!
The scene in the shipping industry actually resembles a shark tank. The market participants are trying to survive and to gain market shares through company takeovers.
Mergers seem to be the only viable way for many. We continue to operate in our niche segment and continue to assert ourselves successfully in a difficult environment.
Economically important is the reasonable operation and utilisation of our ships to their capacity.
We manage this equally through our established departments of the shipping company inspectorate and the freight department. Thanks to the latter we have a very good access to the cargo side and/or well known charterers.
The banks honour our entrepreneurial performance and see how we assert ourselves successfully in the market.
Moreover due to many years of a trusting cooperation with our investors, we have access to the required equity, whereby we are able to implement the planned fleet expansion. It is a good time to enlarge our fleet. In the moment we have 20 ships in management, of which we look after 2 live stock transporters technically and the other 18 ships are in full management.
Except for the last German limited partnership (KG) model, we own the other 17 mainly alone or they are in joint ownership with a very selected circle of friendly investors.
This structure functions very well, as all involved partners think and act entrepreneurial, therefore decisions can be made quickly, forward looking strategies agreed upon and investments can be decided. This makes the necessary talks with our banks more effective and easier, because we can act and decide quickly.
Question: Does it make sense to invest in ships again? Is size still an important parameter in shipping?
Mad Dabelstein: The prices for used ships correlate with today’s charter rates. Ships for sale are not any longer labelled with a financially or economically incomprehensible purchase asking price. Thus, the purchase of tonnage is economically profitable again. The financial parameters are well compatible with the charter rates we currently have on the market.
The market participators, especially the financing banks seem to understand, that not the charter market is too low, but the ship mortgages on the ships are rather too high.
The ships that are now in the finance books of the banks have all been financed at a time that from today’s perspective can be described as a “bubble”, when rates of construction/purchase prices were at historical highs.
The ships profitability has returned to the level it had before the result of the “shipping bubble”. This requires adjusting the ship’s value to the earning power, thus enabling new investments in ships for the first time.
We can see that our business is slowly picking up again.
Our ships are very well in demand in the market and we can choose again from several offers. The size of our fleet is not for our own purpose, it is important for market acceptance and the economic efficiency of our company’s managed ships.
We do not need the double number of employees for twice the number of ships. We can manage 30 to 35 ships with our current level of staff without us having to increase the number of staff significantly and creating an additional expensive set up.
Question: Who are your investors and how do they react to you expansion plans?
Mad Dabelstein: Our investors are entrepreneurial individuals and family offices, as well as institutional investors. Transparency and trust are in the foreground, the lack of alternative investments in assets makes the participation in a shipping company or its holding attractive.
Real estate prices have already risen sharply and it is possible, that a bubble could form and burst. The majority of our investors engaged in real estate believe that it is too late to invest in the asset real estate. The stock market on the other hand does not offer a transparent alternative from the point of view of our investors, it exists a certain amount of scepticism about investing in equities. The ship market which has been severely hit has found its place and is slowly recovering.
Overcapacity of cargo hold is slowly being reduced, as the new buildings of ships continue to decline. Banks are also willing to adjust the rating of destitute ships in their portfolio.
Good investment opportunities are arising for us. Overall, the private placement of ships is again of interest and potential investors are coming to us. Our investors are entrepreneurs and know the risk.
Question: Where does MC-Shipping stand in three years and how do you want to achieve your goals?
Mad Dabelstein: I think we will have around 35 to 40 ships in 2020. Our ships will then consist of container ships of up to 5000 TEU, MPP ships up to 25,000 tonnes and handysize bulk carriers between 35,000 and 40,000 tonnes. That is at least the declared goal, without the aforementioned ship sizes being firmly set. We are currently expanding our chartering department to further intensify the existing access to the cargo side and charterers .With regards to our MPP-fleet, we recently set up a chartering platform “MCO7” with our long time Danish friends Ocean7.
As a result, our chartering department, which consists of five employees, has been increased by another five Danish colleagues. It is irrelevant here, that our cooperation with Thorco has meanwhile been terminated – the expectations on both sides were too different.
The focus is and always has been the optimal utilisation our ships, which we have underpinned with this step.
In the container department we also discuss with a close partner how we can position ourselves on the market together.
Alliances are important in our business and may accomplish that we can build a chartering department with 15 to 20 employees within two to three years. So we want to continue to achieve the optimum for our ships and the investors involved in them.
The interview was conducted by Andreas Nölting.