The shipping industry will
this year scrap the largest number of oil tankers in over half-a-decade, driven
by weak earnings, firm prices for scrap steel.
The shipping industry will this year
scrap the largest number of oil tankers in over half-a-decade, driven by weak
earnings, firm prices for scrap steel and the need to prepare fleets for strict
new environmental regulations.
The surge in scrapping underscores how
the sector is grappling with one of its worst-ever crises, hit hard after rates
for transporting oil plunged to multi-year lows in the wake of excess tanker
supply and tepid demand as OPEC production cuts bite.
"The tanker markets are definitely
in a trough at the moment, with one of the worst years in a decade in terms of
freight rates and returns," said Ralph Leszczynski, head of research at
ship broker Banchero Costa in Singapore.
The tough operating conditions are
expected to persist until at least the second-half of 2019, analysts and
industry sources said.
Estimates on the number of tanker
demolitions vary between the four shipping analysts that Reuters spoke to, with
the most conservative standing at a seven-year high in 2018.
About 10.3 million deadweight tonnes
(DWT) have been sold for demolition from January to April this year, compared
with 11.2 million DWT for the whole of 2017 and 2.5 million for 2016, said Erik
Broekhuizen, head of tanker research and consulting at ship broker Poten &
Partners Inc.
"OPEC production cuts are hurting
the market, and as long as they are in place, the tanker market will remain
challenged," he said, adding that scrapping had picked up for large
vessels in particular.
Since early 2017, members of the
Organization of the Petroleum Exporting Countries (OPEC), Russia and other
non-OPEC crude producers have curbed exports to fight a global oil glut.
The imposition of new U.S. sanctions
against Iran looks set to further reduce oil flows later in 2018, although
Saudi Arabia and Russia have discussed potentially raising output to fill the
subsequent void.
Source:
dev discourse. 03 June 2018
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