31 August 2011

GDSA Weekly Demolition Report for the WEEK 34 of 2011:

Week Ending: 26th August 2011 (Week 34, Report No: 34/11)

The traditional lull summer period and the fragile economic and shipping environment has brought a sense of uncertainty in the investment scene with buyers not willing to commit to new transactions unless asset prices show significant correction downwards. The newbuilding sentiment is weak hovering at much lower levels comparing to previous weeks highs. The demolition activity has shown this week a strong rebound with 88% of the activity being centered on the bulk carrier segment.

Overall, the newbuilding business is down by 17% in comparison with the buying momentum in the secondhand market, while the demolition activity is at similar levels with the volume of S&P activity. The week closed with 35 transactions reported worldwide in the secondhand and demolition market, posting a 21% rise from a similar week in 2010 when 29 transactions had been reported and secondhand ship purchasing activity was standing 77% lower than the ordering business. Surprisingly, the highest activity has been recorded this week in the secondhand market due to strong buying momentum in the tanker segment for smaller vessel sizes.

Demolition Market:

In the demolition market, the uncertainty of global financial markets has a direct impact on the shiprecycling industry. Since the U.S. economy downgrade the volume of activity and scrap prices have eased off significantly with scrap buyers remaining skeptical to commit to new units unless they see the new direction in prices. Scrap prices have fallen by around $30/ldt for the last month in the Indian subcontinent region and owners are struggling to beach their vessels at levels excess $500/ldt.

Now paying less than $500/ldt for dry/general cargo and about $520/ldt for wet cargo. The Ramadan period does not alleviate the current status and there are hopes for a rebound from the end of August. 

The threat of closure remains, even the official extension of the market till early October, and some owners put off their decision for beaching their vessels in Chittagong.

Scrap prices have not slipped below $450/ldt and now the price gap with the Indian subcontinent region has narrowed with hopes for more intense activity in the future. 

Market Analysis:

  • The week ended with 18 vessels reported to have been headed to the scrap yards of total deadweight 740,996 tons.
  • In terms of the reported number of transactions, the demolition activity has been marked with a remarkable 157% rise from previous week’s activity, while there has been a 281% increase of the total deadweight sent for scrap.
  • In terms of scrap rates, the highest scrap rate has been achieved this week for a handysize vessel M/V “EMI S” of 34,913dwt built 1983 with 7,830tons of lightweight at $525/ldt in Bangladesh.
  • Bulk carriers are the most popular scrap candidates recording a 400% weekly increase of scrapping activity.
  • At a similar week in 2010, demolition activity was standing at similar levels, in terms of the reported number of transactions, 18 vessels had been reported for scrap of total deadweight 356,048 tons with tankers, reefers and Ro-Ro carriers  being on the frontline comparable with nowadays concentrated interest in the bulk carrier segment . India was offering the best levels by paying $400/ldt for dry/general cargo and $435/ldt for wet cargo

Source: Golden Destiny SA. 26 August 2011 

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