Shipping investors told the party has 12-18 months left, at most

Shipping investors should expect 12 to 18 more months of strong earnings — and not much certainty after that. That was the most concrete number on offer at this week's Maritime CEO Forum at the Yacht Club de Monaco, where executives warned that geopolitical disruption is inflating demand and, with it, the risk of expensive investment decisions.

Christoph Toepfer, chief executive of Borealis Maritime, put it bluntly. Shipping, he said, is "living on borrowed time" as conflicts and trade disruptions keep tonne-mile demand artificially high.

"I always enjoy staying late at the party," Toepfer said, before noting that resolving geopolitical crises could unwind some of the demand underpinning today's markets. Rather faster than the market might like, one assumes.

How long does the good run last?

Andy Dacy, CEO and CIO of JP Morgan Asset Management's Global Transportation Group, was the optimist of the panel. "We're on a plateau of some sort for at least the foreseeable future," he said.

His reasoning is demographic, of a sort. The enormous number of vessels delivered between 2004 and 2012 will approach recycling age over the coming years. That demolition pipeline, Dacy argued, offsets any demand lost if geopolitical disruption fades.

"We have at least another 12 to 18 months of good times ahead of us based on bad things, of course," he observed. Strong earnings built on wars and rerouted trade lanes. The industry has seen worse foundations, though not many.

Carlos Pena, chief executive of CTM, was less enamoured of tanker valuations specifically. His advice: consider selling VLCCs at today's elevated prices, but stay invested in dry bulk, which hasn't enjoyed comparable earnings yet.

Isabelle Rickmers, chief executive of TURTLE, moderated the session, titled Money and Ships.

What does a good investment actually look like?

The panel's definitions of success diverged sharply. Toepfer recalled turning a $10m containership investment into $37m, then reinvesting the proceeds in two large anchor handlers — subsequently sold for $130m. A 13-fold return across two trades, for those keeping score at home.

Pena argued the best decision is sometimes accepting substantial losses early. Closing expensive charter positions allowed CTM to survive and build its pool operations.

"You need to have courage and lose money," Pena said.

Massimo Giovannini, managing partner of TST Group, agreed from experience. In 2014 he declined to buy six Korean-built handysizes at roughly $17m apiece — around $102m of exposure — just before years of depressed dry bulk earnings. Walking away, it turns out, was the trade.

Is another financial crisis coming?

Despite expecting a downturn, the panellists split on whether shipping faces a genuine financial crisis. Toepfer said no: strong balance sheets, abundant cash and low leverage will prevent widespread distress, with investors waiting to buy whenever prices weaken.

"I don't think we will see a proper distressed market in the next 10 years," he said. His one nuance: listed shipping companies may trade at steeper discounts than privately held vessels in the next downturn.

Dacy was more cautious, predicting a downturn within five years. He highlighted, though, how shipping's reduced borrowing needs have insulated it from competition for capital — competition that is intensifying elsewhere.

"AI is sucking up capital across the board," Dacy warned. Shipowners, for now, hold enough cash to repay debt rather than chase additional financing.

Pena stressed that financing remains available for attractive projects. His advice to newcomers: gain experience before committing capital at today's prices. A modest proposal, in a market where modesty is currently out of fashion.

Beyond timing, the panellists flagged protectionism, a possible Taiwan crisis and speculative newbuilding orders as the major threats — particularly unfixed containerships and car carriers scheduled for delivery several years out. Tonnes of capacity arriving into a market nobody has committed to yet.

For shipowners, the practical calculus is straightforward. Cash-rich balance sheets buy time; elevated VLCC prices and unsold orderbooks reward sellers; and the demographic wave of 2004-2012 tonnage hitting recycling age may cushion whatever comes when the geopolitical premium finally deflates.

The trajectory to watch, per Dacy's clock, is the next five years — with the first 12 to 18 months looking considerably friendlier than the ones after that.