22 March 2011

Attractive Prices Lure Ship Owners Towards Scrap Yards:

The dreadful state of the dry bulk market during the first couple of months of 2011, coupled with attractive prices have finally persuaded many ship owners, especially from the dry bulk segment of the market, to scrap their older vessels, in what could be a life-saving opportunity for many shipping companies.

As has been widely discussed, the faster rhythm of demolition activity could help alleviate the burden of tonnage oversupply issues that has weighed down the dry bulk market in recent months.

With Bangladesh finally reopening for business after almost 10 months of null activity, things could be picking up pretty soon. Already there are reports of rejuvenated activity in Bangladesh, although according to the latest report from Golden Destiny, some of the key rules imposed in Bangladesh suggest that toxic gases and hazardous materials from vessels would need to be cleaned prior cutting activities commence. Also, gas free for Hot Works certification would now be required at Bangladesh for wet tonnage.

No vessel that arrives locally for recycling would be permitted to anchor unless the vessel arrives in "Gas Free" safe for "Hot Works" condition.
No ballast water can be discharged at outer anchorage or at local yards.
Labourers / workers under the age of 18 would not be permitted to work on the yards.
Labourers permitted to work on local yards would need to be trained at an institute supervised by the Bangladesh Marine Academy.

"Pakistan was struggling to pick up units even when the major shiprecycling nation was out of the game and now it seems even harder to compete with India and Bangladesh. However, Pakistan buyers’ appetite remains and they are prepared to pursue aggressively new units.

China once more has been left in the last rankings, but it still snaps some high LDT purchases after its aggressive bidding on capesize tonnage.

Overall, the demolition business appears to follow an upward trend from the beginning of New Year, in terms of volume of transactions and scrap prices. Dry market’s plunge within January stimulated owner’s decision for scrapping their overaged units and pushed scrapping business 180% higher from January-February 2010. Bulk carriers seem to hold the lion’s share of scrapping business during the year to date, 36% of the total number of vessels reported to have been headed to the scrap yards, while liners follow grasping 28%. Scrap prices are hovering at higher levels from the end of 2010, with demo countries paying more than $450/ldt for dry and wet cargo, while Bangladesh’s opening seems to drive the market at levels excess $500/ldt" said Golden Destiny.

According to the shipbroker’s report, during January – February 2011, 116 vessels were reported to have been headed to the scrap yards equalling a total deadweight of 5,151,389 tons, with India being on the frontline grasping 59% of the total business. In terms of reported number of transactions, the demolition activity is 4% lower from 2010 activity, but the increased volume of bulk carrier’s demolition activity brings relief in the oversupplied segment with hopes for further scrapping in the future.

In the tanker sector, demolition activity is 48% lower than last year’s levels with liners keeping their high pace of business. During January to February 2010, 122 vessels reported to have been sent for scrap equaling a total deadweight of 4,098,825 tons with Bangladesh paying $360/ldt for dry and $400/ldt for wet cargo, India being in the sideline and tankers grasping 28% of the total business. At the end of February 2009, scrap rates were at much lower levels with Bangladesh paying $275/ldt for dry and $315/ldt for wet cargo, with bulk carriers being once more in the front run after the credit crunch of 2008, holding 45% of the total scrapping business.

Meanwhile, during the past week, several vessels are being reported this week in anticipation of the Bangladesh market opening at firm prices xs $500/ldt. With the news of Bangladesh market reopening, after almost 10 months of closure, scrap prices seem to have firmed and the volume of scrapping activity gets more torrid. Scrap buyers in Chittagong have been starved for a long time and now seem to be ready to bid aggressively new tonnage for their yards that have been laid up for several months.

The demolition scene seems to change with India and Pakistan trying to compete with the aggressive Bangladesh, while market in China has softened by $20-$30/ldt from the highs in mid – February. Bangladesh has jumped in the first rankings this week, in terms of scrap prices, by offering $500/ldt for dry and $525/ldt for wet cargo. Prices in India have also cooled off by offering $465/ldt for dry and $490/ldt for wet cargo.

Even the aggressive bidding by some cash buyers in Chittagong, there are still some worries about the full compliance of Bangladesh breakers with the restrictions imposed by the Bangladesh High Court. The week ended with 15 vessels reported to have been headed to the scrap yards of total deadweight just 349,509 tons. In terms of reported number of transactions, the demolition activity has been marked with a 11.7% w-o-w decrease with vessels of mainly bulkcarriers & tankers appearing in the frontline. In terms of scrap rates, the highest scrap rate has been achieved this week again by India for a 4,887 ldt gas tatnker at $ 540/ldt. At a similar week in 2010, 12 vessels were reported for scrap indicating a positive yearly change 25% in terms of reported number of transactions with the majority of vessels being tankers.


Source: Hellenic Shipping News. issuer:eshiptrading.com. 21 March 2011
http://www.eshiptrading.com/InfoContent-41936-4.html

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