Dealing with the obvious oversupply problem in the dry bulk market is the main solution for the dry bulk market to recover sooner, rather than later, given that demand-wise, not many upticks should be expected. As such, based on data from shipbroker Intermodal, in the first half of 2016, 373 bulkers and General Cargo ships were scrapped, representing 23.8 million tons of dwt carrying capacity.
In its latest weekly report, the shipbroker noted that “comparing the first half of the year with the same period in 2015, we observe that there is an increase overall in terms of dwt and a small decrease in terms of vessels, indicating that bigger dwt vessels have been scrapped so far this year. In terms of dwt, the Capesize figure is up by 3%, the Panamax figure is up by an impressive 40% and the Handymax/Supramax and Handysize figures are up by 33% and down by 31% respectively”.
According to Intermodal’s SnP Broker, Mr. John N. Cotzias, “the higher volume of demolition activity this year has pushed down by 3 years the average demolition age of dry bulk vessels compared to that in 2015. In 2016 so far the average age is 23.5 years, compared to 2015’s 26.5 years, and 29 years witnessed back in 2014. The average demolition age for Capes is now less than 21 years and in just two years this figure has been reduced by more than 5 years for all bulker sizes”.
Cotzias added that “it is also worth noting that demolition activity in Container vessels has also firmed during this year. In the first half of 2016 the scrapping of Container Ships is up by 3 times compared to H1 2015. 79 Container vessels of 265k TEU capacity were scrapped during the first six months of the year, an overwhelming figure when compared to the 61 vessels of 136k TEU scrapped during the entire 2015. In 2016 so far 585 vessels of all types have left the active fleet, representing 29.8mil tones effectively being removed from the “chase” of cargoes. 80% of all dwt scrapped comes from Bulkers and General Cargo ships, 13% from Containers and only 4% comes from Tankers”.
He also noted that “in H1 2015 we had 636 ships of 27.9mil dwt across all sectors scrapped. 2015 ended with 988 ships of 40.5mil dwt removed. If the same pace continues and we follow a similar 2nd half trend as that of 2015, we estimate that with all other things being equal, i.e. freight rates remaining stable across all sectors and that during H2 scrapping activity usually slows down, we could well see 2016 ending with 850-900 vessels and 42-47mil tons being scrapped. Given that global demand growth appears to be static, the only way to bridge the gap between supply and demand in both the Dry bulk and the Container sectors is with increased scrapping. Let’s hope that for the sake of an improved fleet balance, scrapping activity will continue at a healthy pace during the remainder of the year”, Cotzias concluded.
Meanwhile, in the demolition market this past week, Intermodal noted that “Indian breakers were once again behind all the demolition activity that took place in the subcontinent last week, with reported prices reflecting determination on behalf of local buyers, who are still playing catch up with the competition, to regain lost market share following the past months during which both Bangladesh and Pakistan pretty much reigned over the demolition scene. As demolition activity remains much softer compared to the weekly volumes we have been witnessing during the greater part of 2016, one would expect prices to be in sync with this downward trend, as on top of a less active market, the Ramadan together with the Eid holidays and of course the quieter weeks due to the monsoon period have been considerably weighing down on sentiment. Prices in the Indian subcontinent have during the past month nonetheless settled at around $245-250/ldt for dry bulkers and around $265/ldt for tankers, which is still roughly $20/ldt higher compared to the year’s lows witnessed in the region back in February, reinforcing the sense that a price floor has been created. Prices this week for wet tonnage were at around 165-270 $/ldt and dry units received about 145-250 $/ldt”.
Source: Hellenic shipping news. 14 August 2016