More containership capacity is being
demolished than ever before, including old-design ships made redundant by the
new Panama Canal. Drewry checks if this end the current capacity surplus?
Now is not a good time to own an old
containership. Drewry’s Container Forecaster (June 2016) found that, for the
first time, 450,000teu of containership capacity is expected to be scrapped in
just one year, as the containership sector recognises that there are far too
many ships chasing too little cargo.
Based on an average size of 3,000teu for
ships which are being scrapped, this means that about 150 mainly old and
medium-sized containerships will be pulled out of the market or out of
temporary idle positions and sent to the scrapyard in 2016.
In 2015, demolitions were less than half this
level. The surge in demolitions started in 4Q 2015, has continued since and
looks set to reach 450,000teu by the end of 2016, an even higher annual total
than the 444,000 teu scrapped in 2013. (For disclosure, Drewry consultants have
advised some owners and investors to scrap their containerships in recent
years, but we have no ownership links with shipowners and have an independent
view).
In the first three months of 2016 alone, some
14 Panamax ships were scrapped and many of these are German owned and previously
leased out on the charter market. These owners have felt the force of the
charter rate downturn more than most others.
Younger vessels are being scrapped. These
included recently the 6,479teu DS Kingdom (15 years old), owned by DS
Schiffahrts. Two other young ships of 6,350 teu (built 2002) – MOL Precision
and MOL Promise – were also scrapped.
Containerships are normally depreciated over
25 years, so scrapping a 15-year-old vessel implies a write-off of nearly 40%
(the owner also gets some cash for the steel from the demolition yard to offset
part of the loss).
Furthermore, the opening of the new Panama
Canal in June has created a surplus of old “Panamax” ships of around 4,500 teu.
This size and design of ship – previously one of the workhorses of the
containership industry – has essentially been made redundant. More Panamax
vessels will surely head for the scrapyards of South Asia, as their owners or
charterers replace them by newer and more efficient 8,000teu+ ships.
Removing 450,000teu of capacity this year,
however, accounts for just 2% of the current 20-million-teu-strong global fleet
of containerships. This will only make a dent into the over-capacity built
during the 2010-15 period, which saw 4.5 million teu in capacity added to the
industry globally at a time of slowing demand.
For charter owners with older containerships
on their books, the choice is between chartering out ships at historically low
(and loss-making) levels, or paying for idling costs until a hoped-for shipping
market recovery happens, or scrapping the vessels. More will decide that
scrapping is the least bad of the three options. Expect ship scrapyards to be
busy for the remainder of the year.
The
opening of the new Panama Canal, a widening gap between ocean transport supply
and demand and the fear of continuing losses among charter owners are three
compelling factors behind the current surge in boxship demolitions. Although
necessary, ship demolitions will not be enough to bring the container sector
back into balance unless owners also refrain from ordering many new vessels.
Source: marine
link. 19 July 2016
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