Scenario analysis for shipping investment strategies

• Main Author: Xu, Yiming.
• Other Authors: Lam Siu Lee
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/52675
• Institution: Nanyang Technological University

Investment is an activity to set current commitment to derive future incomes. The cyclical nature of the shipping industry and huge amounts of capital involved forebode a high degree of uncertainty in decision-making for ship investment. Thus, scenario analysis emerges as an alternative method to evaluate investment decisions. It helps to overcome the limitations of traditional methods by visualizing a range of possible futures. Little literature of such analysis was found in shipping and thus, this project aims to examine the applicability of it in ship investment activities, particularly in the tanker sector. A survey concluded the key determining factors in making decisions: world trade and economy development, and ship acquisition prices. A scenario model was then formed with proposed investment strategies in each scenario. Moreover, several interviews were carried out with industry professionals to verify the scenario model in the context of their companies. It was found that the scenario model served as guidance in making investment decisions. The interviewees consented on the probable scenarios to happen in 2020 and suggested various investment strategies accordingly. As a further improvement, more detailed tactical aspects, e.g. shipping route and size of the ship, could be featured into the strategies so as to facilitate more detailed and precise decision making.