The shipping boom has created some unlikely sailors, private equity firms among them. Is this another journey they will come to rue?

The case for investing in ships looked watertight in recent years. Annual net profits at manufacturers such as China State Shipbuilding more than doubled last year. Share prices, in spite of the recent softening, tell a similar tale. Korea’s Hanjin Heavy Industries and owner/operator Pacific Basin are up at least 40 per cent in the past 12 months. The rapid industrialisation of China and India has led to buoyant demand for raw materials – and the wherewithal to transport them. But history shows that industrialisation is a blessing followed by a curse, since countries quickly start building their own ships. Witness Japan, whose splurge on ship-building contributed to the market collapse in the 1970s, and South Korea shortly thereafter. Now Chinese yards have shot from nowhere to command 40 per cent of the global order book.