Pricing of marine assets in a dislocated market can be challenging. Opportunistic buyers should not set price trends
The COVID19 pandemic has negatively impacted the demand curve, and logically, demand for shipment and transport. In a weak freight environment, asset prices for marine assets (and assets in other industries) have softened.
Despite the prospects of weak immediate demand, opportunistic buyers seem to be always prepared to buy assets offered for sale, even in weak markets; their willingness to buy, however, comes at a "cost". Often, opportunistic buyers' offers stand at 50% or lower of the expected Fair Market Value (FMV), including FMVs that demonstrably had been achieved recently and just before the market precipitous decline. Whether sellers would accept such opportunistic offers (and, consequently allow for a price level re-set) can depend on many variables, ranging from storage costs to functional obsolescence.
Basil Karatzas, ASA, in latest issue of The Journal of the International Machinery & Technical Specialties Committee of the American Society of Appraisers (Volume 36, Issue 2, 3rd and 4th Quarter 2020) explores. The article titled "Current Marine Asset Pricing Trends, Other than at 'Half-pricing'" can be found by clicking here.