Scrapping Market in the Shipping Industry

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The year 2018 witnessed the most aggressive scrapping in the tanker market. The frequency of scrapping was so high that these events started trending across global maritime community. Higher prices offered by scrapping companies, cost involved in the dry docking of the ships and present as well as spot market returns pushed shipping companies in the direction of scrapping.     

This year, however the trend is opposite this year. In 2019, the dry bulkers are getting demolished more than last year, while the tankers are being kept in service. According to a report by Allied that came in March this year, the first two months of 2019 saw 20 dry bulk carriers scrapped, whereas in 2018 total 70 bulk carriers were breached in whole year.

Yiannis Vamvakas, Research Analyst with Allied noted, “during the first two months of the year, we have already seen 20 dry bulk carriers having been beached, an encouraging number when compared with 2018, which saw a total of 70 vessels being scrapped during the whole year. More specifically, 15 dry bulk carriers were scrapped within the first two months of 2018, further supporting the view that we have seen an increase in activity in the year so far. Going into deeper detail, we can see that 9 of these dry bulk ships were Capesize vessels, while the remainder was comprised by 1 Panamax, 2 Handysize and several smaller vessels. The number of scrapped Capesize vessels was up by 5,44% year-on-year, with the developments in the freight market during the last few weeks having played a crucial role.”

Even more impressive is the comparison with the total number of Capesize carriers that were recycled last year, with activity in the year so far having already surpassed the half way mark of the 16 Capesize vessels in total that were taken out of the global fleet last year. At the same time its noteworthy to point out that there are still 76 vessels in this segment that are above 20 years old, leaving room for further recycling activity to take place this year.

“Another interesting figure is that the average age of Capesize vessels scrapped this year is 22.6, while last year it was 23.3, further pointing out the increased interest noted this year to retire older tonnage. In contrast to this, in the first two months of last year we had already seen 5 Supramax vessels being sent to be beached, while this year owners seem much less keen, despite the ample number of vessels in active service that are more than 20 years old (more than 250 vessels),” Vamvakas noted.

Coming to tanker scrapping, then the report suggested opposite of the scenario that was last year. Also, only 15 tankers were recycled this year as compared to 53 tankers that were scarped in 2018. Out of 15 breached tankers noted this year, the majority of them were product tankers.

If we take a look at Weekly Vessel Scrapping Report of 28th week of 2019 published at Vessels Value, then the trend seems to have continued. Vsevolod Beletskiy, Cedargien, Omar B fall in the category of bulkers that were sold to get scrapped by the companies.

As per NGO Shipbreaking Platform, total of 193 ships have been broken in the second quarter of 2019. !46 ships out of 193 were sold to scrapping beaches of South Asia, which are infamous for their working conditions. Platform sources recorded three fatal accidents, in which total 5 workers lost their lives, bringing death-toll within the shipbreaking industry to 8 this year.

Scrapping of older ships is being seen as one-way street to shipping’s recovery. As freight rates remain at sub-par level, ship owners have been left with not many choices, with recycling of the ships taking priority. The current scrap value for the dry bulk carriers ranges from USD 430/ldt to USD 70/ldt for small tonnage vessel to big tonnage vessels respectively. The increased scraping activity of dry bulkers is expected to offer a boost to scapping market globally.

(References: Hellenic Shipping News, Steel Guru)

Sea News Feature, July 26