Recent revival of the second hand market for cruise ships is good news for the industry – and more so for the smaller players than the bigger ones.
Norwegian Cruise Line Holding group’s acquisition of Ocean Princess from Princess Cruises, the sale of Costa Celebration to an undisclosed buyer – perhaps HNA in China that acquired its sister ship some years ago – and Cruise & Maritime Voyage (CMV)’s acquisition of Grand Holiday from Costa Crociere have all taken place in a scope of a few weeks. Finally, Celestyal Cruises, part of the Cyprus based Louis Group, has acquired the 2002 built Ocean Explorer of 24,308 gross tons.
While CMV has not said whether it has actually bought or just chartered the 1985 built Grand Holiday that it will introduce as Magellan in March, the legal form of the deal is not the most important aspect here. That is the fact that this company is growing – it will also introduce the 550 passenger Azores in January – and that with Magellan it is ready to move to bigger tonnage than what it so far employs.
Companies like CMV and Fred. Olsen Cruise Lines prefer to use smaller ships. However, now CMV has accepted that there is virtually nothing available on the second hand market in the 600 to 1,000 passenger capacity range that it has preferred so far. Nothing remotely modern, that is, apart from luxury grade vessels that do not fit in its portfolio.
Magellan, of 46,502 gross tons, will offer 1,250 lower berths. Fred. Olsen Cruise Lines made the same move with Balmoral, of some 45,000 gross tons and 1,350 lower berths, way back in 2008.
New life on the second hand market means that downward pressure on asset prices that plagued the sector earlier this year will probably ease. It was felt in the first and second generation category in particular, embracing ships built in the 1970s and 1980s. However, the recent sale for scrap of the 1971 built Discovery by the UK based All Leisure group indicates that these first generation cruise ships only attract demolition buyers.
As the average size of cruise ships continues to grow, we think that companies like CMV, Thomson Cruises and Fred. Olsen in the UK plus Phoenix Seereisen in Germany will have to accept that renewal of their fleets will have to mean bigger ships than so far.
Tonnage will really start to become abundant in the third generation, early 1990s built sector, with the 2,000 passenger capacity, 70,000 gross ton Fantasy class of Carnival Cruise Lines as the most numerous class. We think second tier operators in the UK and in Germany should not shun ships of this size. Fleet renewal will have to be their primary interest in the not too distant future.
