11 November 2016

Ships being sent for demolition are becoming younger and younger

Ship owners are willing to sell their vessels for scrap at younger and younger age, especially in the segments which are facing the biggest trouble, dry bulk and container. According to the latest weekly report from shipbroker Allied Shipbroking, over the course of 2016, both the average age and lowest recorded age of vessels being sent to the breakers yard has decreased considerably for two of the main sectors in shipping, namely dry bulkers and containerships. “This development came to roost during the final week of October when we witnessed one of the youngest vessels in recent history to be sent to the breakers yards, that of the 10 year old (i.e. built 2006) panamax containership “YM LOS ANGELES”. This marked a first, however it wasn’t long before we came face to face with a repeat of a second 10 year old panamax containership, namely the “BOX QUEEN”, also heading to the breakers yards, firmly solidifying the fact that many see the scrapping as the only escape from the excessive supply in this size segment”, said Allied.

According to the shipbroker’s Head of Market Research & Asset Valuations, Mr. George Lazaridis, “it is not however as if we haven’t seen fairly young tonnage looking into this option during the course of the year. In mid-September we had heard rumours of another containership of this age being sold to the ship breakers, though as of yet it still hasn’t been beached. Dry bulkers have seen a fair number of fifteen year old vessels being sent for scrap, while the average scrapping age has dropped consecutively over the past 10 months. With the excess supply of vessels being the main burden faced and this glut in supply endangering the future viability for many owners in the market as freight rates still under performing, the easy option to quickly bring the balance back is for more vessels to be scrapped. However as we burn through the overage units in the fleet we remain with less and less candidates to consider and as was the case for containerships the only option is to start looking at younger and younger units as potential candidates. In part this is why the containership sector has seen this development take place at a more rapid pace as the overall fleet is considerably younger than that of dry bulkers while when you take a look at size segments such as that of panamax this problem amplifies further. Taking all this into account, expectations now are for this record low age to be surpassed by a new low and relatively soon”, Mr. Lazaridis concluded.
Meanwhile, Allied noted in its latest weekly report, that “with a slow down in the number of demo candidates coming to market and end buyers needing to up their offers in order to entice some of the higher spec units available, the whole of the Indian Subcontinent seems to have breached above the US$ 300/ldt mark, with some units seeing a considerable excess of even that. It looks as though most of the trouble witnessed in the region and especially in India has been mostly overcome and confidence has started to emerge amongst a number of speculators in the market, who are now showing willingness of pushing the price bounders further north from their current levels. It is interesting to note that despite the fact that we have entered into the eleventh month of the year we have yet to see any sharp increase in the flow of vessels being sent to be beached, while at the same time we have seen some of the youngest ships to be scrapped in recent history. This all does give a vibe that we may be in the brink of another major flow of candidates, something that will surely bring about a sharp downward correction in prices”, the shipbroker said.

In a separate note on the demolition market, shipbroker Intermodal said that “the demolition market was overshadowed last week by the tragic explosion onboard the ex-“FEDERAL 1” (149,235kdwt, blt ’82, Japan) in Gadani, which has halted all activity in the country for the time being and has consequently expedite the need for a change in safety requirements that have – following this tragedy – proven to be insufficient despite the great improvements that have been witnessed throughout the past years. Activity in the Indian subcontinent has taken a hit last week, as apart from cash buyers and breakers in Pakistan who remained inactive – their counterparts in Bangladesh also displayed much less appetite and given the much softer competition as Pakistan remains idle for now, they seem to be in no hurry to commit at current levels amidst a market that could soon see softer prices. Indian buyers have at the same time remained active last week despite the fact that most us expected that the Diwali holidays would impact activity in the country and that the rather unstable scrap steel would eventually affect the appetite of local cash buyers. Average prices this week for wet tonnage were at around 200-300 $/ldt and dry units received about 190-285 $/ldt”, it concluded.

Source: Hellenic shipping news. 11 November 2016

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