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Surge in private equity investment in shipping industry could lead to overcapacity

12 May 2014

ship boat oil tankerA surge in private equity investments in the shipping industry could result in a capacity glut, according to a recent report from Reuters.

Shipping companies have placed orders for thousands of new ships in the past few years, which is similar to the ship ordering binge in the mid-2000s that led to an overcapacity.

The industry could face the same problem in 2016, which could make private equity exits from shipping less profitable.

CFO of tanker and terminals company Stolt Nielsen Jan Engelhardtsen said, “Shipping is not a get-rich-quick business. By virtue of the capital that the private equity funds are pumping into shipping, they are in effect destroying the very prospects that they are chasing.

“Because the investment horizon for private equity is short-term and shipping is fundamentally long-term in nature, private equity’s entry into shipping in most cases is never going to end well.”

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