Much to the delight of industry players, demolition activity numbers have been piling up across the board since the beginning of the year, helping to ease up oversupply problems as much as possible, though, as evidenced by depressed freight rates, still not to much success.
According to a recent report from shipbroker Golden Destiny, demolition activity has increased by an impressive 219% during the first 6 months of the year, compared to the same period of 2010, as capesizes’ underperformance has been enough to prompt ship owners to dispose of their older vessels.
“Average time charter capesize earnings are now hovering at $13,000/day in contrast with July 2009 levels when earnings were averaging at region $60,000/day. Since the beginning of the year, 47 capesize units estimated to have been sent for scrap comparing to only 5 units at a similar period in 2010 and 9 units in 2009. The large appetite for the scrapping of larger size units in the bulk carrier segment is expected to persist till the end of the year as the outlook in the capesize segment remains negative due to oversupply issues and fluctuations in Chinese iron ore demand” said Golden Destiny.
Bulk carriers scrapped took 38% of the total market share. Also, during the second quarter of the year, the pace of dry bulk demolition activity was 38% higher than the first quarter of the year, accelerating significantly on the back of lower rates.
Overall, the first half of the year ended with 400 vessels in total reported for scrap at a total deadweight of region 18.3 mil of tons with bulk carriers and liners being the most popular scrap candidates.
The demolition activity in the tanker and container segment has been subdued as there has been a sharp fall of 50% and 77% respectively from the first half of 2010. It seems that investors feel that the fully recovery in these segments is almost upcoming and they wait to see healthier earnings before deciding to send their vessels for disposal.
In terms of the reported number of transactions –
(January - June 2011)
The demolition activity has been marked with a 21% decline from a similar period in 2010.
In terms of deadweight –
(January - June 2011)
There has been a 27% increase due to scrapping of larger size units this year.
In terms of scrap prices –
There has been softness recently from the high levels paid in May with
Bangladesh now offering more than , $490/ldt for dry and $515/ldt for wet cargo. India
However, there are some worries about the trend in the coming weeks and it seems that sellers and buyers wait the new direction before committing to other deals. There is still uncertainly in the
market as the decision regarding whether the market will be granted an extension has been set for July 12th. The expectation is that the extension will be granted and ruling is viewed more as a formality, but everyone expects the official green light before sending their vessels to the beaches of Bangladesh . Chittagong
, there has been a weak sentiment during the last days with levels offered below $500/ldt for dry units and just excess $500/ldt for wet, but bulk carriers, reefers and liners continue to hit the market at firm levels. India
During the year to date -
The Piraeus-based shipbroker also said that “as we move towards the 3rd quarter of the year, the feeling is that the scrapping business will continue at firm levels for bulk carriers, while substantial volumes will also be recorded in the tanker and liner segment but at lower ratios. Scrap prices will keep their pace and they may rise again upon the official extension of Bangladeshi market operation, with
India winning the largest share of the demolition transactions and to follow”. Bangladesh
Source: Hellenic Shipping News. Nikos Roussanoglou. 27 July 2011