Ship scrapping could swing into the foray during the first weeks of 2011

As the dry bulk market is looking to end the year on a low note, in fact the lowest in almost a year, ship owners could very well be looking to offload their older carriers to scrap yards around the world. With scrap prices holding firm and buying interest still remaining high, it seems that the wise thing to do right now would be to sell some of the older carriers for demolition. These are vessels which are currently facing stricter controls and rules – not to mention port inspections – especially when their owners are looking to trade them in European ports. At the same time they have returned their purchase values more than once throughout the years, making the decision to decommission them an easier one.

But the key reason would be that dry bulk rates are currently hovering at such low levels, mainly as a result of a tonnage oversupply, with more and more newbuilding hitting the water. So, maybe it would be a good time to consider scrapping. In fact this has been the case in the recent past, i.e. whenever the dry bulk market took a plunge, owners would rush to scrap yards, but as soon as rates picked up again, we even witnessed ships heading towards the Indian peninsula for scrapping to be directed back to pick up new cargoes!

For the time being though, demolition activity is looking up. According to report from Golden Destiny, scrapping of ships saw a weekly increase of 114%, as 15 vessels headed to scrap yards equalling a total deadweight of 573,902 tons with bulk carriers, tankers and liners holding the 86% of the total demolition activity.

In terms of demolition countries, the news are not so encouraging for the Bangladesh industry as BELA has been successful once again in its appeals to the high court and allow no further imports of scrap vessels.

On December 15th, the BDESH High Court passed an official order to local authorities to cease the issuance of fresh NOCs for future/incoming vessels.

On the other hand, in terms of scrap prices, the rates are spectacular for the eager owners who are ready to scrap their vintage tonnage.

China is said to have been bid $448/ldt for a capesize built 1991 whereas Turkey is offering region $300/ldt and Pakistan is near fetching $500/ldt for wet units. At the beginning of the year, scrap rates for dry cargo were standing at $300-$350/ldt for dry and $360-$400/ldt for wet cargo.

In its last report of 2010, GMS said that –

• Bangladesh remains (and is expected to be) out of the scene well into January. India leads the pricing chart and the biggest buyer of vessels.
• Pakistan remains marginally behind with wet prices and  
• China is getting closer to picking up units in light of their recently improving levels.

Supply is expected to remain strong in the immediate future and as prices continue to hold, January could well see sale and purchase activity improving as buyers return to the bidding tables. The report went on to say that Indian buyers were still at the forefront of market negotiations, eagerly bidding for available tonnage. As a result, the few vessels being worked this week fetched some rather strong and surprising levels.

“While a marginal improvement of local fundamentals could well be the reason behind the firming prices, speculative offers/levels from Cash buyers has been the modus operandi for a good bit of the present year and also explain the stronger numbers behind the fixtures. Meanwhile, as China prices continue to improve and a good bit of the available tonnage is discharging in Chineses waters, some owners may not see the additional $20/ton as a large enough benefit in sailing towards the sub-continent. Additionally, as Pakistan continues to trail a few paces behind for the wet tonnage, Indian buyers do have their work cut out for them when January comes around.

Source: Nikos Roussanoglou, Hellenic Shipping News Worldwide. Wednesday, 29 December 2010

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