New Builds vs. Second-Hand Ships: What Shipowners Need to Consider

My name is Davide Ramponi, I am 20 years old and currently training as a shipping agent in Hamburg. In my blog, I take you with me on my journey into the exciting world of shipping. I share my knowledge, my experiences, and my progress on my way to becoming an expert in the field of Sale and Purchase – the trade with ships.

The decision between purchasing a new build or a second-hand vessel is one of the most fundamental choices a shipowner can make. Both options come with their own advantages, challenges, and long-term implications. While new builds offer state-of-the-art technology and better energy efficiency, second-hand ships are often more affordable and immediately available.

So, what factors should shipowners consider when making this decision? In this post, I will break down the key differences, discuss the pros and cons of each option, and highlight real-life scenarios where new builds prove to be the better investment.

Advantages of New Builds: Customization and Cutting-Edge Technology

Ordering a new build means having the freedom to tailor a vessel exactly to business needs. But what exactly makes them so attractive?

1. Adaptability to Specific Requirements

• New builds allow shipowners to customize design, capacity, and technical specifications.

• This is particularly important for specialized vessels such as LNG carriers, offshore support ships, or environmentally compliant tankers.

2. Latest Technologies and Compliance

• New ships incorporate the latest propulsion systems, navigation technology, and IMO-compliant green features such as alternative fuels and exhaust scrubbers.

• Stricter environmental regulations, like the IMO’s EEXI and CII frameworks, make it essential to invest in ships that meet future requirements.

3. Energy Efficiency and Operational Cost Savings

• Modern hull designs, optimized propellers, and advanced fuel-efficient engines significantly reduce fuel consumption.

• While second-hand vessels may require expensive retrofits, new builds already meet efficiency standards from day one.

Disadvantages of New Builds: Higher Costs and Long Delivery Times

Despite their advantages, new builds come with challenges that every shipowner must weigh carefully.

1. High Initial Costs

• The cost of building a **brand-new vessel is significantly higher** than purchasing a second-hand ship.

• Additional expenses, such as **custom design, classification approvals, and financing costs**, add to the investment.

2. Long Delivery Timelines

• Depending on shipyard capacity and backlog, **delivery times can stretch between 18 months to 3 years**.

• For companies needing an **immediate** fleet expansion, waiting for a new build might not be a viable option.

3. Market Uncertainty

• Economic downturns or demand shifts during the construction period can alter market conditions.

• The price of second-hand ships fluctuates daily, while new build orders are locked into long-term contracts.

Key Decision Factors: Economic Viability vs. Market Conditions

When should a shipowner invest in a new build versus opting for a second-hand ship? Here are some key considerations:

1. Business Model and Operational Needs

• If a company operates in a stable, long-term market (e.g., LNG transportation), new builds offer reliability and cost savings over time.

• However, if flexibility is needed due to fluctuating charter rates, a second-hand vessel might be the smarter choice.

2. Market Conditions and Asset Value

• In a booming shipping market, demand for new builds increases, leading to higher shipyard prices and longer delivery times.

• Conversely, in a market downturn, second-hand vessels become more affordable, making them a cost-effective alternative.

3. Financing and Cash Flow

• New builds require significant capital investment and financing commitments.

• Second-hand ships offer a faster return on investment (ROI) as they can be deployed immediately.

Real-Life Example: When a New Build Pays Off

A leading container shipping company recently faced the decision between ordering a new build or acquiring second-hand tonnage.

Scenario:

• The company wanted to invest in fuel-efficient, low-carbon vessels to comply with upcoming IMO regulations.

• Market forecasts showed a rising demand for green ships, making an investment in eco-friendly new builds a long-term strategic move.

• Instead of purchasing an older vessel and retroactively installing energy-saving technology, the company opted for a new LNG-powered containership.

Outcome:

✅ The company secured a long-term charter contract, covering operational costs.

✅ Lower fuel consumption resulted in significant savings over 10+ years.

✅ The resale value of an IMO-compliant, modern vessel remains high compared to outdated tonnage.

This example demonstrates that when regulatory compliance and efficiency are key, new builds justify their high initial investment.

Conclusion: Choosing the Right Ship for Your Business

The decision between a new build and a second-hand ship ultimately depends on a shipowner’s business strategy, financial flexibility, and long-term goals.

• If customization, efficiency, and compliance are priorities, a new build is the better choice.

• If immediate availability, lower upfront costs, and flexibility are more important, a second-hand vessel offers advantages.

In the ever-changing shipping market, making the right investment is critical. What factors do you consider when evaluating a new ship purchase? Share your experiences and insights in the comments—I look forward to the discussion! 🚢⚓