Outlook for scrapping of older vessels in 2014 looks lackluster:

With all indicators pointing towards a reduction in 2013's demolition activity by a factor of 20%, it's pretty clear that the industry won't see the 2012 record year anytime soon. In a presentation given out during this week's Marine Money Conference in Athens, Wirana Shipping Corporation, a leading player in the ship demolition market, noted the explosion of ship recycling over the crisis years.

Wirana, a "cash buyer", i.e. a company which purchases the vessel for cash from the owner and then resells it to a recycling yards, acting like a middleman", noted that from a megre 300 ships which were recycled in 2009, we reached a record breaking 1,300 vessels being sold for scrap in 2012. Similarly, the demolition market went from $1 billion annual turnover to a massive $6 billion. During 2012, India received nearly 500 ships for recycling, given that the Indian Subcontinent is responsible for about 80-85% of the total recycling business (India, Bangladesh and Pakistan most notably). 

Right about here end the good news, since 2013 is shaping up to be anything but 2012. Although the available figures are only for the 9 month period, i.e. from January to the end of September, the trend is pretty clear by now. More particulary, India has fallen from 4.4 million lt LDT during the whole of 2012, to just 2.35 million LTD so far in the year. Similar falls are also noted in Bangladesh and Pakistan, indicating that 2013 will, according to Wirana, likely show a 20% reduction over last year. For instance, so far in the year India has received just 250 vessels, against 500 over the whole of 2012.

Among the hard realities that Wirana describes in its presentation is the fact that there is a quite a bit of oversupply in the global fleet, while at the same time, new fuel efficient vessels orders don’t stop. "In 2012 alone, 213 capesizes were delivered. Against that only 73 srapped. In 2013, only 30 scrapped till August, deliveries lower, but still about 69 Cape+VLOC vessels were delivered. So, recycling more and more seems to be the only way out, because what comes in has to go out. Recycling should be the balancing Factor. But recycling numbers have dropped and the agony seems to be getting prolonged.

As a result total scrapping in 2012 alone – 59.5m dwt – a new all-time record. India 19.4m (32.6%), Bangladesh 13.7m (23.02%), China and Turkey 16.3m (27.41%). Average age of ships scrapped has been 23 yrs in 2012 compared to 29 in 2011. And with the recent spike in dry charter rates the total scrapping by the year end will be even slower", Wirana said.

Source: carbon positive. 21 October 2013

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