Ship owners could soon have to rush to scrapyards across the Indian subcontinent or other countries, in order to achieve better prices for the sale of their older vessels for scrap.
In what could trigger more sales of ships for demolition and in that way, help lower tonnage oversupply, a major issue across all shipping segments, CRWeber noted, in a recent analysis that average demolition values in China and the Indian subcontinent have come under pressure lately, with “$/LDT values posting a 7.3% decline since mid‐October. Although global steel prices have gained 4.8% since January, prices have shed 13.9% since reaching a YTD high in March. Given the price discount for steel reclaimed via tanker demolitions in locations with cheap labor relative to global steel prices, demolition values have been less impacted than global steel prices; average China and Indian subcontinent $/LDT values have only lost 2.5% since March.
Several global steel production facilities are reportedly idling production as the European sovereign debt crisis continues to stoke uncertainty in global markets. Accordingly, the gap between global steel price indices and demolition values could narrow, mitigating greater further $/ldt losses Despite a more limited pricing gap, even minor $/ldt losses may present fresh downside risk for tanker markets as the recent progression to newer, double hull tanker demolition sales remain one of several key factors to alleviating overcapacity in the sector” said CRWeber in its report.
It went on to mention, that double hull tanker tonnage accounted for 78.1% of the total tanker tonnage demolished, a figure significantly higher than the average of just 18% during the 1st 3 quarters. “Over the past 2 weeks, however, demolition sales activity has declined markedly, with just one unit reported as sold to such buyers”, concluded CRWeber.
Meanwhile, in the crude freight market, there have been significant changes in the MEG VLCC front, during the past few days, says shipbroker Fearnleys. In its latest weekly report, the shipbroker said that “with more than 130 VLCC fixtures already registered for November loading in the MEG and with additional cargoes still making their appearance, owners are clearly feeling more optimistic and are more confident in their efforts to lift rates further. Charterers, on the other hand, are faced with a thinner selection of tonnage and a more confrontational attitude from owners. Under the circumstances, we deem it likely that MEG VLCC rates could rise somewhat above present levels. We would also advise a careful monitoring of an eventual early start to the December loading programme. The availability of VLCC tonnage in the
Atlantic remains slim, but this has so far
had little impact on rates due to the relative stability of the Suezmax market
in the area. Suezmax activity was stable in WAF and rates have remained at last
week´s levels. In the Med/Bsea Suezmax rates were rather flat and could
experience further downward pressure as a result of diminishing delays in the
Turkish straits which are already at nominal levels. Rates for Aframaxes
trading from the Nsea to the Continent remained unchanged from last week at
ws100. In the Med and in the Caribs, however, Aframax rates experienced a
slight decline as a result of more than sufficient available tonnage for the
requirements in play” concluded Fearnleys.
In its analysis of the tanker market during the third quarter, Teekay Tankers said that “crude tanker rates weakened significantly during the 3rd quarter of 2011, primarily due to an oversupply of vessels relative to demand. In addition, a number of isolated and seasonal factors exerted downward pressure on rates during the quarter. The decision by International Energy Agency (IEA) member countries to release 60 million barrels (mb) of oil from government stockpiles impeded tanker demand during the quarter, particularly in the
where 30 mb of crude oil was released
from reserves. In Europe, the ongoing absence of Libyan oil exports as well as
oilfield maintenance and unplanned outages in the United
Sea further weighed down on crude tanker demand. Tanker rates have
remained generally weak in the early part of the fourth quarter to date, though
rates in the Mediterranean and Black Sea
spiked significantly in October as a result of an increase in transit delays
through the Turkish Straits due to stricter regulations on the passage of
vessels during non-daylight hours.
The tanker fleet grew by 20.0 million deadweight tonnes (mdwt), or 4.4%, in the first 3 quarters of 2011 compared to a net increase of 14.5 mdwt, or 3.4%, in the same period last year. The level of new tanker ordering remains very low with just 6.4 mdwt of tanker orders placed in 2011 to date, of which 2.0 mdwt was attributed to shuttle tankers, compared to 40.0 mdwt of tanker orders in 2010, of which 0.7 mdwt was attributed to shuttle tankers. As a result, the global tanker order book has fallen to 96 mdwt, the lowest level since March 2006. Expressed as a percentage of the active tanker fleet, the order book is at its lowest level since February 2003 at 20% of the total fleet” concluded Teekay.
Source: Hellenic Shipping News Worldwide. By Nikos Roussanoglou. 11 November 2011http://www.hellenicshippingnews.com/index.php?option=com_content&view=article&id=57383:demolition-prices-could-fall-on-lower-steel-prices-&catid=1&Itemid=61