Ship scrapping activity still higher than 2010 but not enough to alleviate oversupply:

Scrapping of older ships has picked up this year, but as is indicated by a lackluster dry bulk market, it’s still far from enough to help alleviate the oversupply issues that the market has been facing since late last year. Still, prices offered by scrapyards remain much higher than two years ago, when the ship demolition industry had grinded to a halt.

Looking at the past couple of weeks’ activity, although there were fears during the last days that the Bangladesh Enviromental Lawyers Association will show resistance against the recent lifting of vessels' ban for scrapping, hungry buyers in Chittagong continue their purchases. Shipbroker Golden Destiny reported that scrap prices in India remain firm at $500-$520/ldt for dry and $530-$540/ldt for wet tonnage, while Bangladesh levels are still not so competitive that the owners will risk sending their vessels for scrapping in Chittagong.

China still tries to compete with its rivals at the low levels of $445/ldt for dry and $465/ldt for wet tonnage, while Pakistan is still on the sidelines paying less than India and Bangladesh and with no success for securing some more tonnage. Thus, India drives the market for one week more; as there is still uncertainty in Bangladesh and the temporary spike in levels do not yet offer comfort for the vessels’ beaching.

The scrapping spree for capesize tonnage continues with two more large units heading to the scrap yards this week. The demo deal grasping the headlines of this week is for a VLOC “ALSTER N” 305,000dwt of 41,500 ldt fetching $510/ldt in Bangladesh. In general, bulk carriers seem to dominate the demolition scene due to sharp volatility of the freight market.

The previous week ended with 19 vessels reported to have been headed to the scrap yards of total deadweight 1,396,745 tons. In terms of the reported number of transactions, the demolition activity was almost the same however in terms of deadweight sent for scrap there has been a 78% increase. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker sector by India for a tanker of 28,750dwt “WASEL” at 568/ldt. India this week attracted almost 58% of the total demolition activity. Comparing to a similar week in 2010, demolition activity has been decreased by 13.6%, when 22 vessels had been reported for scrap.

China was leading the game by paying $400/ldt for dry and $425/ldt for wet cargo and Bangladesh was offering just $325/ldt for securing dry and $410/ldt for wet cargo.

During the week before, “on the demolition front, although permission for the beaching of the vessels has already been given the situation in Bangladesh is still vague. There is still uncertainty regarding the start up of the breaking process. Some market sources suggest that the time lag from the time of beaching till the recycling process will be around 60 days. Furthermore, speculation surrounds the market that the Bangladesh Environmental Lawyer’s Association (BELA) could soon be heading back to court in order to re-challenge the recently issued order and there may be some form of closure after the conclusion of the next tide running from 4-7th May.

In terms of scrap prices, the opening on the Bangladesh has not still pushed prices at higher levels with India leading for the time being the market as both prices and number of transactions continues to head north. The price differential between levels offered from China and the weak rates in Bangladesh give one more advantage to Indian ship recyclers. Several vessels have been headed to the scrap yards of the Indian market before the traditional monsoon period begins in mid May and scrap prices begin their downward revision. It is worth mentioning that one more capesize of 127,825 dwt has been sent for scrap this week at $485/ldt as is Gwangyang.

Market rumours suggest that the vessel has been headed to Bangladesh but the final destination is not yet confirmed. During the year to date more than 20 capesizes have been reported for scrap, a record activity from 2010 levels.

Bangladesh has been ranked in the third place behind China offering $485/ldt for dry and $515/ldt for wet cargo. On the other hand, Pakistan managed to win a tanker of 33,303/ldt and with the tightening of tanker regulations in Bangladesh we may see even more tanker scrapping business in Pakistan.

The week ended with 18 vessels reported to have been headed to the scrap yards of total deadweight 783,944 tons. In terms of reported number of transactions, the demolition activity has been marked with no change but there has been a 40% increase regarding the total deadweight sent for scrap. In terms of scrap rates, the highest scrap rate has been achieved this week in the tanker sector by India for a tanker of 12,637dwt “CASPER” at 1220/ldt incl 940 tons of stainless steel.

India along with Bangladesh has attracted 72% of the total demolition activity. At a similar week in 2010, 25 vessels were reported for scrap indicating a negative yearly change 28%, in terms of the reported number of transactions, with most of the activity being centred in the tanker segment (44%), whereas demo countries were offering lower scrap rates than today’s levels, by $75/ldt less dry/general and $80/ldt for wet cargo” said the shipbroker’s report.

Source: Hellenic Shipping News Worldwide. By Nikos Roussanoglou.

Thursday, 12 May 2011

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