IMX Session To Explore Impact Of Inflation, Logistics On Vessel Valuations

Inflation and rising interest rates are driving up the cost of just about everything. Every industry is facing labor challenges. Logistics issues are making it harder to secure anything from manufactured goods to some raw materials.

No doubt, the way these issues manifest themselves will vary from industry to industry. One way they are impacting the maritime industry is by driving up valuations for towboats, both existing vessels and new construction projects.

George Beck, marine asset appraisals manager for Sabine Surveyors, a Metairie, La.-based provider of marine surveying, auditing and consulting services, will discuss the way inflation is impacting the maritime industry, specifically with regard to towboat valuations, during the 10th annual Inland Marine Expo (IMX), to be held in Nashville, Tenn., at the Music City Center May 31–June 2. Beck’s session, titled “Inflation and Its Effect on Marine Asset Valuations,” will be held June 2 at 11:15 a.m.

Logistics issues, the higher-than-normal cost of steel, high interest rates: all are impacting vessel maintenance and construction schedules, Beck said. Interest rates are making some companies reticent to move forward on new build projects or acquisitions.

Another way the current market is impacting the maritime industry is vessel maintenance and major overhauls.

“Yesterday, I had a conversation with a guy on the inland waterways who is getting ready to put his boat in a yard to overhaul its two main engines,” Beck said.

That’s obviously not an unusual task, Beck said, but in this case, the boat owner had been waiting more than a year for that work because it had taken that long to procure some of the parts needed for the overhaul.

Beck gave a second example of a radar panel that had gone out on a blue-water vessel. There was a three-month delay to get a replacement.

With the reliance on Amazon and Walmart and other large-volume retailers, most people have gotten used to next-day or two-day shipping to meet their just-in-time needs. However, with the logistics issues now in place, Beck said vessel owners and shipyards have to think differently.

“They have to know that just-in-time is not going to work,” he said. “You need to plan this well in advance, because if you don’t, you’re going to be adding to your downtime.”

Many operators are opting to stockpile hard-to-find and critical parts, Beck said, and even more should consider that course of action.

“Because just-in-time just doesn’t work,” he said. “It’s not possible right now.”

Interestingly, Beck said high interest rates aren’t dissuading everyone from building new or acquiring existing vessels. Companies with a lot of capital don’t have to worry as much about interest rates, Beck said. Besides, with the two recent bank failures, there’s pressure on the Federal Reserve to slow interest rate hikes, which could stabilize the situation for companies needing to finance.

“There’s still a lot of movement on vessels and a lot of vessels being financed,” Beck said. “Because of that, I think shipyards are going to remain high-priced even though raw materials like steel aren’t as high as they were. Basically, I think if people want to buy, they’re going to buy, and if people want to sell, they’re going to sell.”

Regardless of what the Federal Reserve or world markets do, however, the maritime industry is and will remain stable, Beck believes, because of utilization and demand for the goods transported on the inland waterways, from oil and gas to coal, petrochemicals and agricultural products.

“Relatively speaking, our industry is rather stable compared to other sectors, and you can look back 20 or 30 years on the inland side and see that,” he said.