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Vintage vessels to boost demolition sector

Burgeoning scrap prices due to a lack of demolition candidates should finally persuade owners to push the button on ageing fleets

A downturn in shipping markets, already being seen in the crude tanker and capesize bulker sectors, should help to tip the balance in favour of scrapping

THE demolition market remains quiet, with brokers reporting only three ships committed for recycling in recent days.

Nevertheless, analysis of the major fleets suggests there is plenty of latent scrap metal still operating in the market.

“Vessel prices seem to be bouncing back in both Pakistan and Bangladesh this week,” GMS reported this week. “Steel plate prices have improved overall, especially in India, and the lack of tonnage continues to frustrate Recyclers.”

As such, any available tonnage is seeing intense competition at and above market pricing from hungry end buyers, said GMS.

Recent sales reported by brokers included the 118,000 dwt floating production, storage and offloading vessel Umuroa which was sold by BW Group on an “as is” basis at Batam for $620 per ldt to undisclosed breakers. Meanwhile, the 1996-built chemical tanker Rich Sino (35,000 dwt) was sold to Bangladeshi breakers for $615 per ldt.

Analysis of Lloyd’s List Intelligence data confirms no sign of an upturn in demolition so far, with only 23 vessels scrapped during January with a combined gross tonnage of 1.16m gt and down slightly from the negligible 1.18m gt committed in December (see graph):

 

 

Meanwhile, Braemar ACM recently questioned why more ships are not being sold for scrap.

“The answer is most of the older tanker fleet continues to trade in exotic trades,” it said. “However, the collapse of dry cargo rates is bringing the option for many owners to again consider capitalising on (vessels with) large lightweight tonnage with forthcoming surveys.”

Age profile analysis of the three major cargo carrying fleets suggests that the tanker sector has the greatest concentration of ships of 20 or more years old.

Some 12% of the crude and products carrier fleet, in terms of capacity, is 20 years old, or older. This is followed by containerships (10.3%) and bulk carriers (9%). See graphs:

 

 

Should the retirement of old ships in the major sectors not pick up any time soon there is no shortage of vintage vessels in other sectors.

“If you look at containerships and most of the bulker fleets, high scrap prices don’t mean much in a good market,” said head of Lloyd’s List Intelligence Consulting Chris Palsson. “Looking to the future there is a high number of old, fairly small ships in the general cargo, product tanker, ro-ro and passenger sectors.”

Given the tightening of environmental screws via the green revolution this should drive more scrapping of these segments due to the expense of making them compliant with upcoming regulations.

Nevertheless, a downturn in shipping markets, as already being seen in the crude tanker and capesize bulker sectors, should help to tip the balance in favour of scrapping.

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