Ship Scrapping To Set New Record

The Loadstar
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June 19, 2016

Beached ships in Alang, India. 

By Mike Wackett (TheLoadStar) Ship scrapping appears set to hit record levels this year, according to shipbroker and services firm Clarksons.

In its latest review of the demolition market, it says that after a slowing in the second half of 2015, ship scrapping “returned to a rapid pace” this year.

According to Clarksons, 457 vessels, with a combined deadweight of 25.8m tonnes, have been demolished this year as owners looked to “clean out” older tonnage.

“The majority of this tonnage (262 ships) has been in the bulker sector, particularly in the larger sizes,” noted Clarksons, “while boxship scrapping has also been considerable, as earnings in these sectors continue to languish.”

According to the data of another London broker, Braemar ACM, 83 containerships, equating to 277,500 teu, have been sold for scrap in the year to date – 25 in the past 30 days alone, confirming the accelerating appetite for scrapping.

This figure compares with just 45 vessels (90,500 teu) at the same point last year. Throughout 2015, Braemar saw 85 containerships, amounting to 187,500 tea, scrapped.

And with no apparent negative impact on steel scrapping from reduced steel scarp buying budgets in Pakistan and Bangladesh, sales have continued apace.

The 2001-built 5,500 teu post-panamax MOL Solution was reported as sold for scrap at $280 LDT [light displacement tonne, used to determine the value of a ship which is to be scrapped] last week, and it is expected that many more relatively young ships of this size, particularly panamaxes, will be sent for demolition in the months to come, as the industry continues its quest to deploy bigger, more cost-efficient tonnage.

Indeed, one analyst has predicted that after the Panama Canal’s new locks open this month, the current idled fleet of 40 panamax containerships could be swelled by another 80 vessels of 3,000-5,100 teu as they are ousted from routes transiting the waterway by larger tonnage.

Many of these redundant ships will have scant chance of redeployment, and with daily hire rates for a panamax at record lows – insufficient to cover operating costs of $5,000 per day – owners will have little option than to take the scrapping route.

Meanwhile, Maersk Line is still involved in a spat with environmental campaigners over its decision to continue to send vessels recycling on the Indian beaches of Alang.

The groups, as part of the Clean Shipping Coalition, maintain that the waste management systems at Alang are lax and do not meet the requirements of EU-approved ship-scrapping sites, which currently exclude the Indian facility and are limited to a few yards in China and Turkey.

Maersk has threatened to flag-out its ships to bypass EC guidelines on ship scrapping, which has enraged the campaigners who accuse the Danish group of adopting a “cavalier attitude towards the environment”.

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