Not enough tonnage is being scrapped to counteract the vast number of newbuildings entering service. BALANCE can be said to describe a situation in which different elements are equal or in the correct proportions. Unfortunately for shipowners, this sort of equilibrium is not apparent in the maritime industry right now. Record newbuilding deliveries over the past two years have seen the global fleet grow at an alarming rate, leaving competition for cargoes as fierce as ever and dragging down freight rates.
And after months of this situation repeating itself, the strain of weak chartering markets is starting to take its toll on owners’ bank balances. However, a mechanism for reducing the effects of a growing fleet has been in place the whole time. Ship demolition has been hailed as the saviour of the shipping markets over the last two years by analysts, owners and bankers, but although they have all talked about it, not enough tonnage has been scrapped to counteract the vast number of newbuildings entering service. At the start of 2009 it was predicted that more than 1,000 ships would be scrapped and that came true. Then towards the end of last year, as models of fleet growth were drawn up, demolition experts forecast that even weaker chartering conditions would prompt owners to dispose of around 2,000 vessels in 2010.
Unfortunately this was not the case.
Data from Greek shipbroker N Cotzias shows that by the end of November, 1,141 ships had been sold for demolition, totaling 27.7m dwt. This is shy of the 1,240 ships that it reported were scrapped in the whole of 2009. By comparison, rival broker Clarksons reports that 2,566 ships of 134m dwt have been delivered from shipyards globally in the year-to-date. That represents almost eight ships per day.
In terms of volume, this is up from the 117m dwt delivered in 2009 and 67m dwt in 2008. N Cotzias said in its latest report that the record number of deliveries this year was “a seriously alarming problem”, which it felt “has not been faced with the amount of seriousness and adequate severity” it needed.
The Greek shipbroker made particular reference to the vast dry bulk orderbook that in 2011 alone has 1,851 ships or 129m tonnes set to hit the water, to which a huge number of slipped deliveries from this year will also be added. It said the record numbers seen this year had already “somewhat dampened the overall positive effects of China
“Cancellations and scrapping are the only effective measures we may use against the overcapacity issues, but unless these ships [that are] cancelled or scrapped are tripled in volume, the problem will occur and we will just feel that up to now we would have swept the dust under the carpet,” the report said. Monthly figures from the Greek shipbroker show that the first six months of this year saw 725 vessels sold for demolition — almost 75% more than the 416 ships scrapped between July and November.
In contrast, London
The N Cotzias data shows 160 ships of 2.9m dwt from the containership, tweendecker and multipurpose fleet have been sold for recycling so far this year, representing just a third of the 387 vessels totalling 9.2m dwt that were demolished in 2009. This coincides with a revival in the boxship chartering market that saw the Hamburg Shipbroker’s Associations’ Contex Index recover to 600 points in September, compared with record low levels in the mid-250 range at the start of the year. But demolition sales lost from this sector have been replaced by tonnage from the tanker and gas markets, after a year of struggling to find employment for older vessels and the looming deadline of the International Maritime Organization’s phase-out of single-hulled tankers at the end of this year.
The number of ships from the tanker and gas sector sold for demolition has reached 329 vessels so far this year, totalling 15.6m dwt and representing nearly 30% of total scrap sales, the N Cotzias data shows. This is up from the 198 ships of 9.8m dwt sold in 2009, which represented 16% of last year’s demolition deals. And for shipowners who have decided to sell-off ageing tankers this year, they have received more cash for their steel compared with last year.
Although only representing a third of demolition deals this year, breakers have paid over $1bn for wet tonnage in 2010, representing half of the total $2bn paid out so far in 2010. By comparison, breaks paid out $446m for tankers and gas carriers last year, of a total $1.8bn for all demolition sales. But one area where less cash is being spent by breakers is the dry bulk sector. Despite bulk carriers retaining a consistent proportion of scrap sales at around 30% of the market, just $390m has been paid out for these vessels this year, compared with $528m last year.
Source: Lloydslist. Tuesday, 14 November 2010
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