18 September 2017

Conditions prime for more ship demolitions

Activity in the demolition market is primed for an increase, a trend already occurring in the industry. With prices rising above the $400/lt LDT mark, ship owners are more eager to dispose of their older ships. In its latest weekly report, GMS, the leading cash buyer of ships said that “the omnipresent heat permeating through virtually all of the major recycling destinations continued for another week as some MASSIVE priced deals were concluded to increasingly eager cash buyers, as sub-continent levels for most decent spec units are now positioned well above the psychological USD 400/LT LDT mark. It was therefore no surprise to see the deal count pick up this week, with some show stopping high profile and large LDT (market & private) units confirmed into all locations (even China and Turkey)”.

GMS said that “despite freight rates having picked up of late – something that has subsequently kept many scrap eligible vessels in service up to the present time – many owners have now decided to cash-in on their older tonnage as surveys gradually draw closer. A majority of the supply of vessels over these summer months has been wet tonnage and this week was no exception, as a suezmax tanker and two FPSOs were sold at ever-improving numbers. The sooner Pakistan reopens for tankers, the better it would be as they continue to miss out on some quality tonnage and it has been over 8 months since this market closed for wet units, following the accidents onboard the FSU and the LPG. Many in the industry are wondering just how long the ongoing momentum will continue and whether it would even persist beyond the next few weeks, given that the markets have improved far too swiftly and (some might consider) even irrationally over the last several weeks. As the saying goes, “even the sky’s a limit””.

In a separate note, shipbroker Intermodal said that “demo prices breaking the $400/ldt level last week it is no wonder that activity in the demolition market spiked, with a number of deals concluded across the Indian subcontinent , average prices for which are now at levels visited back in January of 2015. The surge demo levels have seen in the past weeks seems to have finally inspired matching selling activity in the past couple of weeks; with a number owners contemplating to sell their vessels for scrap during the summer finally convinced to do so at these lucrative levels. Bangladesh kept the lion’s share in recent deals for yet another week, with the Indian market following closely, while as Pakistan is still closed for tanker tonnage, buyers in the region continue to bid exceptionally high for dry candidates, forcing a good part of the market to wonder whether the market is getting ahead of itself. Average prices this week for tankers were at around $270-410/ldt and dry bulk units received about 260-385 $/ldt”.

Meanwhile, Clarkson Platou Hellas said that “with the European holidays in full swing it hasn’t detrimented the market previous week with still some notable sales, which continue to show that prices above USD 400/ldt are showing no signs of respite as Owners look to grab the impressive numbers being seen at present. With this firming market, many believe this will entice more Owners to join the party especially when Tanker rates continue to remain at depressive levels due to the oversupply in the sector. This means that Pakistan continues to be left out of the majority of market tonnage and therefore any large ldt Dry/Container units will look to achieve a premium on a delivered basis exceeding USD 425/ldt at the present time for this destination”.

Source: hellenic shipping news. 24 August 2017

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