ESTIMATED RETURN-ON-INVESTMENT OF OIL TANKSHIPS

A model to estimate return-on-investment of oil tankships is developed to assess the historical returns of various types of tanker ownership. Looking back in time may offer some guidance for the future and also expose pitfalls of this investment area. Study results are that the return-on-investment for oil tankships has historically ranged from at best break-even to about 30 percent for the early '50's and 20 percent for late '60's and early '70's. Debt financing can be used to increase the rate of return on equity. In the mid- '60's because of increasing tanker size and overall tonnage capacity, charter market rates were at a long-term low. During this period the loss from operation was below the annual cost of debt. Therefore, to minimize the loss, remaining in operation was a better alternative than laying up the vessel. Because of these extreme results, market strategy must be one of correct timing of tanker purchases in order to pay off debt financing or achieve sufficient capital recovery to be ready for protracted lower market rates. In developing the rate-of-return model the calculations require estimating tanker purchase price, operating cost, charter-market income, and resale or scrap value. In addition, assumptions are made on the types of financing available. These are the debt-free case, a standard percentage financed, and a leveraged lease where 100 percent of the purchase price is financed.

• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/oclc/1623789
• Corporate Authors:

  Society of Naval Architects and Marine Engineers

  601 Pavonia Avenue
  Jersey City, NJ  United States  07306-2907
• Authors:
  • Walsh Jr, R G
• Publication Date: 1978-1

Media Info

• Features: References;
• Pagination: p. 51-74
• Serial:
  • Marine Technology Society Journal
  • Volume: 15
  • Issue Number: 1
  • Publisher: Marine Technology Society
  • ISSN: 0025-3324
  • Serial URL: http://ingentaconnect.com/content/mts/mtsj

Subject/Index Terms

• TRT Terms: Capital investments; Chartering; Economic analysis; Financing; Freight traffic; Market assessment; Oil tankers; Operating costs; Planning; Rates; Tanker shipping
• Uncontrolled Terms: Freight rates
• Old TRIS Terms: Economic analysis (Tanker operations); Financing plans; Tanker chartering; Tanker economics
• Subject Areas: Administration and Management; Economics; Freight Transportation; Marine Transportation; Planning and Forecasting;

Filing Info

• Accession Number: 00170743
• Record Type: Publication
• Source Agency: Marine Technology
• Files: TRIS
• Created Date: Mar 14 1978 12:00AM