04 October 2012

5% of Global Bulk Shipping Fleet Doomed to Scrapyards this Year, Capesizes Lead the Way:

(Dow Jones) Shipping companies are demolishing their vessels at an unprecedented rate this year, hoping to eliminate some capacity to cushion the impact of a flood of newly built ships entering the market.

The record-setting ship scrapping comes as charter rates have dropped to new historical lows, which in some cases are barely enough for companies to recover a vessel’s operating and financing costs.

While the global financial crisis is partly to blame for the dismal performance of freight rates, part of it is the result of the frenetic pace of shipbuilding that began around the same time as the onset of the crisis.

Industry executives say this year, a record 55 million deadweight tons of global shipping capacity will be sold at a scrap value of over $5 billion and sent to scrap yards mainly on the Indian subcontinent to be recycled. About 40 million DWT of ships were demolished last year.

Many smaller- and medium-sized shipping companies are being forced to scrap their ships because they can no longer afford to operate them or pay their loans, while some of the world’s biggest names are actively demolishing their ships in an attempt to revive the industry.

This financial year, Mitsui O.S.K. Lines Ltd. (9104.TO) will scrap or idle up to 20 Capesize vessels that are typically used to ship dry commodities like coal or iron ore, up from 14 last year. To ensure they eliminate competition, shipowners are increasingly seeking guarantees from cash buyers that their vessels will be scrapped and not resold to a rival, Mr. Sharma said.

Capesize vessels–among the biggest dry bulk carriers, with a capacity of more than 150,000 DWT–have been the worst hit by the overcapacity and will be the single-largest category of ships being destroyed this year, industry executives said.

A shipping boom between 2004-2008 fuelled a flood of fresh orders for Capesize vessels, and although their charter rates collapsed by nearly 98% within six months in 2008 amid widespread financial turmoil, the newly built Capesizes are still flowing in.

More dry bulk carriers will enter the market this year than ever before, said Peter Sand, chief shipping analyst at international shipping association Bimco. Last year, 100 million DWTs of newly built dry bulk carriers were delivered globally, equivalent to all deliveries over the 2005-2008 period, Mr. Sand said. This year, the number is expected to jump to 110 million DWT.

The surge in ship demolitions this year will take out nearly 5% of the global dry bulk fleet, which is “much welcomed but likely only to provide a temporary breather to the oversupplied dry bulk market,” Mr. Sand said.

The outlook for global trade still remains gloomy, and some in the industry believe more ships will need to be destroyed to bring the market in balance. Last week, the World Trade Organization slashed its 2012 global trade growth forecast to 2.5% from 3.7%, citing the euro zone debt crisis and economic growth concerns in the U.S. and China.

“This year is definitely a peak, but we expect this high level of scrapping to remain until 2015,” said Keyur Dave, chief financial officer of Wirana Shipping Corp., one of the world’s largest cash buyers of ships for demolition.

A.P. Moller-Maersk A/S (MAERSK-B.KO) said this week that it will further reduce its capacity through wider use of slow-steaming measures that not only save fuel but also have an effect of reducing industry capacity as ships take more time to complete a voyage.

Many of the companies scrapping their vessels are still ordering new ones, signalling their desire to build a fleet with the right blend of older and newer, more fuel-efficient vessels that gives them an advantage over rivals when competing for contracts, Mr. Dave said.

While up until 2008, companies repaired their old vessels to extend their lifespans, shipowners are now turning far younger vessels over to scrap yards, quickening the pace at which the steel re-enters the global market. Mitsui, for one, is scrapping Capesize vessels that are 15 years old or older, compared with 23 years in the past.

The 55 million DWTs of ships being scrapped this year will yield about 13 million-14 million tons of steel. A third of these will be recycled in Bangladesh, where the entire steel industry is geared toward using scrap ship steel. Recycled ships meet nearly half of Bangladesh’s steel demand.

Source: gcaptain. 28 September 2012
http://gcaptain.com/global-bulk-shipping-fleet-doomed/

IMO Ship-Recycling Rules:


The Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) meets for its 64th session from 1 to 5 October 2012, at IMO Headquarters in London.

As well as discussing matters relating to the implementation of energy-efficiency, ballast water management and ship-recycling regulations, the MEPC will also consider formally designating the Saba Bank, in the North-eastern Caribbean area of the Kingdom of the Netherlands, as a Particularly Sensitive Sea Area (PSSA).

Work to continue on energy-efficiency measures for ships

The MEPC is expected to continue its work on further developing technical and operational measures relating to energy-efficiency measures for ships, based on a work plan agreed at the last session. This follows the adoption of the new chapter 4 of MARPOL Annex VI, which enters into force on 1 January 2013 and includes new requirements mandating the Energy Efficiency Design Index (EEDI), for new ships, and the Ship Energy Efficiency Management Plan (SEEMP) for all ships.

This work will include the development of guidelines for determining minimum propulsion power and speed to enable safe manoeuvring in adverse weather conditions and the development of EEDI frameworks for ships not covered by the current EEDI, e.g., ro-ro and cruise passenger ships, and ships with non-conventional propulsion systems, e.g., diesel-electric or turbine propulsion. This work is expected to continue at this session, based on submissions received.

Technical cooperation for the implementation of mandatory energy-efficiency measures

Regulation 23 of chapter 4 of MARPOL Annex VI on Promotion of technical co-operation and transfer of technology relating to the improvement of energy efficiency of ships requires Administrations, in co-operation with the Organization and other international bodies, to promote and provide, as appropriate, support directly or through IMO to States, especially developing States, that request technical assistance. It also requires the Administration of a Party to MARPOL Annex VI to co-operate actively with other Parties, subject to its national laws, regulations and policies, to promote the development and transfer of technology and exchange of information to States which request technical assistance, particularly developing States.

The MEPC will further consider a draft MEPC resolution on promotion of technical co-operation and transfer of technology relating to the improvement of energy efficiency of ships. The resolution is intended to provide a framework aimed at promoting and facilitating technology transfer, to support the implementation of the new regulations on energy efficiency for ships.

Market-based measures to address the reduction of GHGs under discussion

The MEPC is expected to continue its consideration of proposed market-based measures (MBMs) to reduce greenhouse gas (GHG) emissions, which would complement the technical and operational measures already adopted.

It is anticipated that the discussions at MEPC will focus on an update of the GHG emissions’ estimate for international shipping and the methodology and criteria for a comprehensive impact assessment of the MBM proposals (following earlier, initial impact assessments), with a view to studying in detail the direct and indirect impacts on (consumers and industries in) developing countries of the introduction, and non-introduction, of an MBM for international shipping under the auspices of IMO.

Availability of fuel oil to meet air pollution requirements to be considered

The MEPC will further consider matters relating to the availability of fuel oil to meet the requirements set out in the MARPOL Annex VI regulation on emissions of sulphur oxides (SOx) from ships.

Fuel oil sulphur content (expressed in terms of % m/m – that is, by weight) is required to be a maximum of 3.50% m/m (outside an Emission Control Area (ECA)), falling to 0.50% m/m on and after 1 January 2020. Depending on the outcome of a review, to be completed by 2018, as to the availability of compliant fuel oil, this requirement could be deferred to 1 January 2025.

The MEPC is expected to consider the start date for this review.

It should be noted that, within ECAs, fuel oil sulphur content (expressed in terms of % m/m – that is, by weight) must be no more than 1.00% m/m; falling to 0.10% m/m on and after 1 January 2015.

Ballast water management systems up for approval:

The MEPC will consider the reports of the twenty-first, twenty-second and twenty-third meetings of the Joint Group of Experts on the Scientific Aspects of Marine Environment Protection (GESAMP) Ballast Water Working Group (held during 2012), with a view to granting basic approval to five, and final approval to three, ballast water management systems that make use of active substances.

The MEPC is expected to reiterate the need for those countries that have not yet done so to ratify the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, 2004, to achieve its entry into force at the earliest opportunity. To date, 36 States, with an aggregate merchant shipping tonnage of 29.07 per cent of the world total, have ratified the Convention. The Convention will enter into force twelve months after the date on which not fewer than 30 States, the combined merchant fleets of which constitute not less than 35 per cent of the gross tonnage of the world’s merchant shipping, have become Parties to it.

The Committee will also consider a number of proposals related to the practical implementation of the Convention, aimed at harmonizing the type-approval and sampling procedures, and eliminating uncertainties with regard to compliance and preventing the possibility of improperly penalizing ships’ crew members.

Specific proposals related to highly specialized ships will also be examined by the MEPC, with a view to developing specific guidance for offshore support vessels and mobile offshore units, in anticipation of the entry into force of the BWM Convention.

Recycling of ships – guidelines to be considered:

The MEPC is expected to consider draft Guidelines for Survey and Certification of Ships under the Hong Kong Convention (Survey and Certification Guidelines) and Guidelines for Inspection of Ships under the Hong Kong Convention (Inspection Guidelines), which have been further developed by the intersessional correspondence group on Ship-Recycling Guidelines.

These guidelines, along with other guidelines already adopted, are intended to assist ship-recycling facilities and shipping companies to commence introducing voluntary improvements to meet the requirements of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, which was adopted in May 2009. The treaty will enter into force 24 months after ratification by 15 States, representing 40 per cent of world merchant shipping by gross tonnage, and combined maximum annual ship-recycling volume not less than 3 per cent of their combined tonnage. Efforts are being made to encourage Member Governments to ratify the Hong Kong Convention at their earliest convenience.

Saba Bank PSSA designation to be considered:

The MEPC will consider formally designating the Saba Bank, in the North-eastern Caribbean area of the Kingdom of the Netherlands, as a Particularly Sensitive Sea Area (PSSA), following approval in principle at the last session.

Associated Protective Measures were approved by the Sub Committee on Safety of Navigation (NAV), at its meeting in July 2012, namely, the establishment of a new mandatory ‘no anchoring’ area for all ships and a new ‘area to be avoided’ (for ships of 300 gross tonnage or over) in the proposed PSSA.

Amendments to the IBC Code set for adoption:

The MEPC will consider, for adoption, draft amendments to chapters 17, 18 and 19 of the International Code for the Construction and Equipment of Ships carrying Dangerous Chemicals in Bulk (IBC Code), which have been already been approved for adoption by the Maritime Safety Committee (MSC 90).

Sewage treatment plant guideline set for adoption

The MEPC is expected to consider for adoption draft 2012 Guidelines on implementation of effluent standards and performance tests for sewage treatment plants, which are intended to provide guidance on the implementation of new requirements (coming into effect from 1 January 2016) for sewage treatment plants installed on passenger ships operating in MARPOL Annex IV special areas.

Mandatory audit scheme: approval of draft III Code and MARPOL amendments expected

The MEPC is expected to approve the draft IMO Instruments Implementation Code (III Code), which sets the standard for the IMO audit scheme, and to approve draft amendments to MARPOL to make the III Code and auditing mandatory under that treaty.

The aim is to adopt the MARPOL amendments in 2014, once the III Code has been formally adopted by the IMO Assembly, in 2013.

Recognized organizations code to be approved:

The MEPC is expected to approve the draft Code for Recognized Organizations (ROs) and related draft amendments to MARPOL (Annexes I and II) to make it mandatory, for adoption at a future session.

The Code will provide a consolidated text containing criteria against which ROs (which may be authorized by flag States to carry out surveys and issue certificates on their behalf) are assessed and authorized/recognized, and give guidance for subsequent monitoring of ROs by Administrations.

Source: 28 September 2012
http://www.turkishmaritime.com.tr/news_detail.php?id=15355

Update: Maritime Administration dumps ship-sinking practice

In what environmentalists call "a major win," the U.S. Maritime Administration has reversed course and will look to recycle old vessels before making artificial reefs out of them.

The new policy is to not sink ships built before 1985, when ships were often built using toxic substances, in the ocean.

The U.S. Maritime Administration is a division of the Department of Transportation and has its own fleet of noncombatant governmental ships. The policy would not apply to other governmental departments, such as the U.S. Navy and Coast Guard, unless the Maritime Administration owned one of their former vessels.

Ships are often used by the government to create artificial reefs in oceans.

The Basel Action Network said since 1972, approximately 45 ships have been disposed at sea by the U.S. Maritime Administration. Those vessels often carried PCBs and other potentially toxic substances. In addition, the scrap metal is likely worth millions of dollars. There are 38 ships in the Maritime Administration's fleet designated for disposal. Of the 125 vessels owned by the agency, only one was built after 1985.

"They are basically saying ship recycling in the U.S. will be their predominate means of disposal," said Colby Self, director of BAN's green ship recycling program. "Just five or six years ago, they said ship recycling was too expensive in the U.S. They were looking for alternatives [to recycling] and artificial reefing was one of them. They are coming back to their senses and choosing recycling over ocean dumping."

Officials with the U.S. Maritime Administration did not return repeated calls for comment on the policy change.

The change might have more to do with economics than wanting to do right by the environment, Self said.

"I think the last five or so vessels the Navy has recycled, they did it at a cost of [a total of] 2 cents to the government," he said. "In past years, that definitely wasn't the case. They are seeing there is an economic benefit to recycling as opposed to sinking, which costs millions of dollars."

Self said it's important that a business case can be made for recycling, as that can only lead to good things.

"I think the economics is a stronger influence than the environment [in this case],"

he said. "But hey, when positive for the economy and positive for the environment work together, as long as the outcome is good, we're in full support."

BAN has been pressuring the U.S. Navy to adopt a similar policy, calling for an end to its sinking exercises. The Navy has sunk 117 ships since 1999, including three near Hawaii in July. BAN has sued the U.S. EPA for allowing the program to continue. That case remains in federal court.

The Navy does artificial reefing and also sinks ships as part of target practice to simulate war situations. The artificial reefing program has slowed in recent years after twice the amount of PCBs expected from the U.S.S. Oriskany aircraft carrier was found around the artificial reef created off of Florida's coast.

"We've been hard on this administration for continuing these dumping policies," Self said. "We're really pleased to a see positive change … it's definitely a step in the right direction and we commend them for that."

Source: By Jeremy Carroll. 1 October 2012
http://www.wasterecyclingnews.com/article/20121001/NEWS08/121009999/update-maritime-administration-dumps-ship-sinking-practice

GMS report on shipbreaking industry for WEEK 39 of 2012:

It was a tale of two markets this week as India pushed on back to levels of a few months ago whilst Bangladesh sat in the doldrums unable to compete or even offer on any market tonnage.

The Indian resurgence can be largely attributed to an improving currency (against the US Dollar), which ironically, about the same time last year, suffered terribly when the Rupee began to depreciate catastrophic ally to historic lows with local buyers losing 20% of the value of their purchases during this time as a result. Notwithstanding, recent gains have offered some hope to Buyers in India that previous losses could be recovered and many have started to emerge to the buying table once again, keen to take on tonnage, albeit, still with a hint of cautiousness to their levels.

The Pakistan market, as usual, has sensed this shift and duly followed suit with their offerings, picking up one or two well positioned larger vessels as a result amidst the dearth of their favored tankers gas free for man entry only.

Meanwhile, it was the Bangladeshi market that was really proving to be the thorn in the side of a majority of the cash buyers with simply no sensible levels emerging there for any types of tonnage being offered. Many vessels had been diverted away from Chittagong shores in recent weeks and it is still proving an incredibly difficult task to bring any firm buyers to the table whilst the market remains swamped with tonnage (both waiting to come in and already stuffed onto the end buyers yards).

China took a deserved breather this week with the onset of the national October 2012 holidays. Many in the industry are hoping that Chinese chop shops come back to the bidding with renewed vigor and aggression to buy and help alleviate the pressure on Bangladesh. Finally, Turkey suffered a massive drop in levels of its own with prices now well below USD 300 per tonne for dry tonnage.

For week 39 of 2012, GMS demo rankings for the week are as below:

Country
Sentiment Market
GEN CARGO Prices
TANKER Prices
India
Bullish
USD395/ltldt
USD420/ltldt
Pakistan
Bullish
USD390/ltldt
USD415/ltldt
Bangladesh
Weak
USD375/ltldt
USD400/ltldt
China
Bullish
USD300/ltldt
USD320/ltldt

Source: steelguru (Source - GMS Weekly) 4 October 2012
http://www.steelguru.com/international_news/GMS_report_on_ship_breaking_industry_for_WEEK_39_2012/286353.html

GMS report on shipbreaking industry for WEEK 39 of 2012:

It was a tale of two markets this week as India pushed on back to levels of a few months ago whilst Bangladesh sat in the doldrums unable to compete or even offer on any market tonnage.

The Indian resurgence can be largely attributed to an improving currency (against the US Dollar), which ironically, about the same time last year, suffered terribly when the Rupee began to depreciate catastrophic ally to historic lows with local buyers losing 20% of the value of their purchases during this time as a result. Notwithstanding, recent gains have offered some hope to Buyers in India that previous losses could be recovered and many have started to emerge to the buying table once again, keen to take on tonnage, albeit, still with a hint of cautiousness to their levels.

The Pakistan market, as usual, has sensed this shift and duly followed suit with their offerings, picking up one or two well positioned larger vessels as a result amidst the dearth of their favored tankers gas free for man entry only.

Meanwhile, it was the Bangladeshi market that was really proving to be the thorn in the side of a majority of the cash buyers with simply no sensible levels emerging there for any types of tonnage being offered. Many vessels had been diverted away from Chittagong shores in recent weeks and it is still proving an incredibly difficult task to bring any firm buyers to the table whilst the market remains swamped with tonnage (both waiting to come in and already stuffed onto the end buyers yards).

China took a deserved breather this week with the onset of the national October 2012 holidays. Many in the industry are hoping that Chinese chop shops come back to the bidding with renewed vigor and aggression to buy and help alleviate the pressure on Bangladesh. Finally, Turkey suffered a massive drop in levels of its own with prices now well below USD 300 per tonne for dry tonnage.

For week 39 of 2012, GMS demo rankings for the week are as below:

Country
Sentiment Market
GEN CARGO Prices
TANKER Prices
India
Bullish
USD395/ltldt
USD420/ltldt
Pakistan
Bullish
USD390/ltldt
USD415/ltldt
Bangladesh
Weak
USD375/ltldt
USD400/ltldt
China
Bullish
USD300/ltldt
USD320/ltldt

Source: steelguru (Source - GMS Weekly) 4 October 2012
http://www.steelguru.com/international_news/GMS_report_on_ship_breaking_industry_for_WEEK_39_2012/286353.html