The Baltic Dry
Index (BDI) ’s positive effect on capacity being removed from the fleet did not
continue into Q2 2016, as capesize demolition came to a halt.
The BDI went from
“devastating” in February to “poor” in April with the highest total demolished
DWT ever experienced in the dry bulk market. Unfortunately, BIMCO’s earlier
claim was realised when demolition activity slowed down as the BDI improved.
Chief Shipping
Analyst Peter Sand comments, “With BDI hitting an all-time low in February
2016, the dry bulk market saw a quarterly record volume of demolished ships in
the wake of it. Subsequently, demolition activity came to a halt as BDI
increased from March to peak at 703 on 25 April 2016.
"Shipowners
were reluctant in the last part of 2015 to scrap, despite clear indications
from the BDI, but responded positively in 2016; up by 15 % as compared to the
first four months of 2015”.
Demolition age
continues to drop
The increase in
scrapping has also seen the lowest average age in the past five years. The
decline goes hand in hand with the increase in scrapping in 2016. Where
capesize in 2015 was the main driver lowering the demolition age, it is now the
panamax and handymax segments influencing the decline from a combined 25.8
years in 2015 to 23.8 years in 2016.
Peter Sand adds,
“Despite the slowdown in demolition activity in April and May 2016 the decrease
in ship demolition age continued from 2015. At an average of 23.3 years today,
demolition age has decreased by 20.5 % over the past four years.
Focusing on the two
larger segments, we see capesize continue its trend towards the 20-year mark,
together with panamax.
The industry needs
to break the trend of halting demolition activity as soon as the BDI improves
marginally. We can only improve the fundamental market conditions if shipowners
are keeping demolition activity up consistently”.
Source:
marine
link. 27 May 2016
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