Ship valuation

Aims

Understands ship valuation procedures

Objectives

Describes the ship valuation process, methodology,
and parameters to be considered when valuing a
vessel
Ship valuation

The value of a vessel

Who needs a valuation

Who provides valuations

Methodology

Market comparison

Commercial not technical
Ship valuation

Valuation types

Market

Demolition

Past or present day

Damaged

Valuation parameters

Sales of similar vessels, &
intuition
Ship valuation

Comparison guidelines

Age

Speed

Deadweight/cubic capacity

Valuations are a matter of opinion

given in good faith

Proforma
Positive and negative points when comparing two vessels

Feature Positive Negative

Country of build Japan/W Europe Brazil, Spain, China, E
Europe
Grade of yard within country 1st grade Japanese yard 2nd, 3rd grade Japanese
yards
Cargo gear Cranes Derricks
Length Panamax less than 225m Over 225m LOA
LOA
Main Engine East Europe licencee
Main engine type Sulzer, B&W, MAN Pielstick, Doxford
 Worked example
Three vessels were sold in the fourth week of February which serve to show how easily a
valuation can be wrong unless sufficient information is obtained.

Name of ship Neo Campanula Luna II Hakusan

Dwt 38891 37895 35501

Draft 10.93 10.83 11.38
Age 6/84 3/86 84
Yard I.H.I Mitsubishi Tohoku
Class NK Lloyds NK
Cubic 46112 CBM 47474 47055
Main Engine Sulzer Sulzer Mitsubishi
BHP 6800 8160 10200
Speed 14.25 kts/21/3 tons - 13.9/27 t
Gear 4/25 ton cranes 4/25 ton cranes 4/25 tons cranes
Hold/Hatches 5/5 5/5 5/5
Price $15.5 million $18.1 million ?
 Worked example
1) 35501/38891 = 0.91 x $15.5 mill = $ 14.15 mill

Age is similar
Hakusan cubic is better but cancelled out by being deep drafted
Shipyard is 2nd class and main engine and speed consumption are inferior to Neo
Campanula.
One might conclude a value of $13.75 million

2) 35501/37895 = 0.94 x18.1 million = $16.95 million

2 years age difference for modern vessel say 2 x 7% p.a = 14% = $16.95 x 0.86 =
$14.5 million
On similar comparison of shipyard, main engine and draft would indicate Hakusan to
be worth about USD 13.9 million

In fact Hakusan was sold for USD 12.8 million why?

In fact Hakusan was sold for USD 12.8 million why?

The vessel was not strengthened for heavy cargoes

No automation in the engine room
The owners were in a hurry to sell before the end of the tax year
The vessel was purchased without the buyers inspecting

Without these facts it is easy to see how valuations can vary. Conversely if Hakusan had been
taken as the basis to value Neo Campanula and Luna II there would have been a discrepancy.
Proforma valuation format

Dear Sirs,

Re: . (flag)

We refer to your request for an opinion as to the market value of the above named vessel,
brief details we understand are as follows:-

Type:
Built:
Classed:
Deadweight/Draft:
Decks:
Holds/Hatches:
Cargo Gear:
Cargo Capacity:
Machinery:

We are of the considered opinion that the present day World Wide market value of this vessel
on the basis of a sale for prompt charterfree delivery for cash on normal commercial terms, as
between willing Sellers and willing Buyers approximately:

USD $ say ..

We have not made a physical examination of the vessel, nor have we examined vessels
Classification Records, but we have assumed for the purpose of this valuation that the vessel
is in sound seagoing condition class maintained, undamaged, fully equipped and freely
transferable.

The particulars of the vessel are from the current Register Books and such other information
as we have been able to obtain from available and relevant works of reference in our
possession, but we can accept responsibility for their accuracy.

We believe this opinion is reasonably accurate, but we wish to emphasize that the figure we
have reached is only a statement of opinion and should not be taken as a representation of
fact. Any person intending to rely upon this figure should satisfy himself by inspection of the
vessel, or otherwise, as to the corrections of the statements set out herein.
Valuation - precautions

Some precautions

No physical examination of ship
valuation based on class records and
other documents related to ship

Ship assumed to be seaworthy & class
maintained, freely transferrable, no
damage

Valuation is a matter of opinion

No responsibility of accuracy of the report
the valuation figure is not a statement
of fact
Individual Assignment 3

Instructions: This question is awarded 5%. Your answer

must be handwritten with not more than 500 words.

Question:
Describe the process for a ship valuation, highlighting the
reasons why these valuations are made and clearly stating
who requests for them.