Ship owners are willing to
sell their vessels for scrap at younger and younger age, especially in the
segments which are facing the biggest trouble, dry bulk and container.
According to the latest weekly report from shipbroker Allied Shipbroking, over
the course of 2016, both the average age and lowest recorded age of vessels
being sent to the breakers yard has decreased considerably for two of the main
sectors in shipping, namely dry bulkers and containerships. “This development
came to roost during the final week of October when we witnessed one of the
youngest vessels in recent history to be sent to the breakers yards, that of
the 10 year old (i.e. built 2006) panamax containership “YM LOS ANGELES”. This
marked a first, however it wasn’t long before we came face to face with a
repeat of a second 10 year old panamax containership, namely the “BOX QUEEN”,
also heading to the breakers yards, firmly solidifying the fact that many see
the scrapping as the only escape from the excessive supply in this size
segment”, said Allied.
According to the shipbroker’s Head of Market
Research & Asset Valuations, Mr. George Lazaridis, “it is not however as if
we haven’t seen fairly young tonnage looking into this option during the course
of the year. In mid-September we had heard rumours of another containership of
this age being sold to the ship breakers, though as of yet it still hasn’t been
beached. Dry bulkers have seen a fair number of fifteen year old vessels being
sent for scrap, while the average scrapping age has dropped consecutively over
the past 10 months. With the excess supply of vessels being the main burden
faced and this glut in supply endangering the future viability for many owners
in the market as freight rates still under performing, the easy option to
quickly bring the balance back is for more vessels to be scrapped. However as
we burn through the overage units in the fleet we remain with less and less
candidates to consider and as was the case for containerships the only option
is to start looking at younger and younger units as potential candidates. In
part this is why the containership sector has seen this development take place
at a more rapid pace as the overall fleet is considerably younger than that of
dry bulkers while when you take a look at size segments such as that of panamax
this problem amplifies further. Taking all this into account, expectations now
are for this record low age to be surpassed by a new low and relatively soon”,
Mr. Lazaridis concluded.
Meanwhile, Allied noted in its latest weekly
report, that “with a slow down in the number of demo candidates coming to
market and end buyers needing to up their offers in order to entice some of the
higher spec units available, the whole of the Indian Subcontinent seems to have
breached above the US$ 300/ldt mark, with some units seeing a considerable
excess of even that. It looks as though most of the trouble witnessed in the
region and especially in India has been mostly overcome and confidence has
started to emerge amongst a number of speculators in the market, who are now
showing willingness of pushing the price bounders further north from their
current levels. It is interesting to note that despite the fact that we have
entered into the eleventh month of the year we have yet to see any sharp
increase in the flow of vessels being sent to be beached, while at the same
time we have seen some of the youngest ships to be scrapped in recent history.
This all does give a vibe that we may be in the brink of another major flow of
candidates, something that will surely bring about a sharp downward correction
in prices”, the shipbroker said.
In a separate note on the
demolition market, shipbroker Intermodal said that “the demolition market was overshadowed
last week by the tragic explosion onboard the ex-“FEDERAL 1” (149,235kdwt, blt
’82, Japan) in Gadani, which has halted all activity in the country for the
time being and has consequently expedite the need for a change in safety
requirements that have – following this tragedy – proven to be insufficient
despite the great improvements that have been witnessed throughout the past
years. Activity in the Indian subcontinent has taken a hit last week, as apart
from cash buyers and breakers in Pakistan who remained inactive – their
counterparts in Bangladesh also displayed much less appetite and given the much
softer competition as Pakistan remains idle for now, they seem to be in no
hurry to commit at current levels amidst a market that could soon see softer
prices. Indian buyers have at the same time remained active last week despite
the fact that most us expected that the Diwali holidays would impact activity
in the country and that the rather unstable scrap steel would eventually affect
the appetite of local cash buyers. Average prices this week for wet tonnage
were at around 200-300 $/ldt and dry units received about 190-285 $/ldt”, it
concluded.
Source: Hellenic
shipping news. 11 November 2016
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