It is strongly expected that the volume of capesize bulkers to be demolished will hit the highest in history this year. The Clarkson Research Services expects 2011's total of capesize bulkers to be scrapped to reach 38 ships, which is a more than two times increase on last year's.
Some prospect that the capesize market condition would be down to the same level as right after the Lehman Shock while scrapping cost is increasing, so the number of capesizes to be demolished could outreach Clarkson's expectation.
A big number of capesizes, about 200 units, are expected to be delivered this year, but the pressure of oversupply can somewhat be alleviated because of the expected increase of scrapping.
There had been a very few demolitions of capesizes after 2003 when market conditions started to improve, but the amount of scrapping rapidly climbed after the Lehman Shock for a short time. However the upward trend of scrapping disapeared again accompanied by suddenly recovered market conditions.
Meanwhile, newbuilding output has increased sharply since 2009 thanks to the large-scale orders placed during the period of newbuilding boom and especially the total deliveries of capesizes between 2008 and 2010 stood for 363 ships, which totally outweighs the total volume of demolished capesizes of 40 units during the same period.
The price of scrapping has rapidly increased by around $100 per ton against a year earlier since late 2010 mainly due to the advance of raw material prices.
For example, the 194,109-dwt capesize built in 1981 was sold for $528 per ton.
The drop in capesize's freight rates has led in the deterioration of payability, and the long-term uncertainty of the freight market condition and the decreased price of secondhand vessels have caused many shipowners to consider ship scrapping.
Also, as the majority of freight contractors try to lower ship ages, aged capesizes are expected to be withdrawn from the market in a fast pace.
Source: Asiasis
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