BIMCO says it is anticipating 2016 to be "the busiest year on record for shipbreaking" of dry bulk vessels, with a capacity of 40 million deadweight tonnage (DWT) to be sold for demolition, compared to last year's 30 million DWT total.
BIMCO disclosed the news in its analysis of the 2016 dry bulk shipping market to date, which it describes as "miserable" and believes could get worse depending on factors such as domestic steel consumption in China.
BIMCO says the prices offered to owners selling their ships for demolition have been "very disappointing" and are due to shipbreaking nations accepting cheap new Chinese steel – which consequently reduced what used to be an 80 percent reliance on scrap for their steel demands.
However, BIMCO states that "the freight market remains the most significant factor behind the decision to scrap a ship or continue trading."
It also notes that the pool of ready-to-break ships is not vast, "but even a modest improvement in the freight rates causes demolition to halt."
In acknowledging that limiting new capacity inflow requires a low level of new orders, BIMCO hopes that less dry bulk tonnage will be ordered in 2016 than the 17.7 million DWT ordered in 2015, the lowest amount since 2001.
BIMCO concludes its analysis by stating that a new record of shipbreaking volumes in 2016 could limit fleet growth to just 10 million DWT, "so all we need is an increase in transported volumes to around 60 million tons to balance out the inflow.
"As little as this may seem, growing from a base of 4,700 million tons – it can prove to be a high bar to jump before we start eating into the significant oversupply of ships."
Earlier this month, BIMCO predicted the dry bulk supply to only grow by about 2 percent this year, while demand remains level.
Source: ship and bunker. 25 January 2016http://shipandbunker.com/news/world/944467-bimco-dry-bulk-scrapping-to-hit-record-40m-dwt-in-2016