Ship owners are expected to hasten the scrapping of older vessels:

As long as freight rates are plummeting and oversupply issues are on the forefront, ship owners are expected to hasten the scrapping of older vessels, in order to make room for the new ones, which currently are flooding the market. In an indication of the dreadful state of the dry bulk market in particular, yesterday, the BDI (Baltic Dry Index) reached another record low, ending at just 651 points, down by 1.66% on the day. 

In its recent report, Golden Destiny (GDSA) said that “in the demolition market, the volume of demolition transactions has shown strong signs during the first month of the year with appetite for large sized vessel unit disposals. The Bangladesh shiprecycling industry has fully opened, but the activity is very light due to the ongoing tax issue that the Bangladesh Shipbreaking Association tries to resolve. Scrap prices for dry and wet units have started to follow an upward revision with China closing neared with the rates offered in the Indian Subcontinent region” said the Pireaus-based shipbroker. 

It went to mention that “levels for dry and wet units have started to exceed $500/ldt, with signs for further vessel disposals as rates keep firm and freight earnings do not support the trading of vintage tonnage. Notable demolition deals in the crude tanker market the disposal of suezmax tankers underlining the dark outlook of this segment with hopes for similar units to follow as a remedy to the oversupply. 

The week ended with 15 vessels reported to have been headed to the scrap yards of total deadweight 988,345 tons. In terms of the reported number of transactions, the demolition activity has been marked with a 12% week-on-week decline, due to 57% and 25% lower volume of demolition transactions in the bulk carrier and liner segment respectively, whereas there has been a 2.1% decline regarding the total deadweight sent for scrap. 

In terms of scrap rates, the highest scrap rates have been achieved this week in the crude tanker segment by Bangladesh and Pakistan for suezmax units at $510/ldt. Tankers have grasped the lion share of this week’s total demotion activity, 33%, with India being on the frontline. 

At a similar week in 2011, demolition activity was down by 20% from the current levels, in terms of the reported number of transactions, 12 vessels had been reported for scrap of total deadweight 710,976 tons with bulk carriers grasping 50% of the total number of vessels sent for disposal. 

India and Pakistan had been offering $465-$475/ldt for dry and $500/ldt for wet cargo, while Bangladesh market had been inactive from the demolition scene” concluded Golden Destiny.

In a separate report, Clarkson Hellas mentioned that “despite the Far Eastern focus on their New Year festivities this week, the market maintained its recent busy schedule, although the sales reported were definitely down from last week. Whilst Bangladesh is open for business, rates on offer are lower than their counterparts from India and few units are being positioned for delivery to Chittagong. Many parties may still be apprehensive selling to this area until such a time, several beaching tides come and go and deliveries/subsequent beachings are completed without any delay or hindrance. 

Indian breakers continue to lead the way in respect of pricings and activity. Rates firmed further this week as the breakers saw steel prices and the currency market maintain its recent steady/positive impetus creating a ‘feel good’ factor internally and thus, the improved sentiment from the waterfront lead to some significant increases in their price indications. All eyes will now fall on China to see how the markets open after their New Year holidays. If they continue in the same vein as they were prior to the holidays, then we could finally see a healthy market with attractive rates from all the major breaking destinations.

Finally, Shiptrade Services also said that “Bangaldeshi market is open but buyers offer levels below those of the rest of the subcontinent. India continues to offer firm levels, and some say extremely optimistic. Pakistan moved at the same pace with buyers offering extremely firm levels. China had holidays and as such, this week was quiet for this market” it concluded.

Source: Hellenic Shipping News Worldwide. Nikos Roussanoglou. 3 February 2012

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