Ships keep on being scrapped, but pace of demolition may not be enough

Thursday, 06 August 2009

A total of 591 ships with a capacity of 18.5 million tons have been scrapped during the period from January to July this year, according to shipbrokers N.Cotzias, numbers which are 300% higher than the relative period of last year, when a total of 140 ships with a capacity of 4.8 million tons had been scrapped. Still, analysts have been indicating that these figures may just not be enough, in order for the market to regain its balance between tonnage supply and demand.

In its latest weekly report, Gibson, a London-based broker said that while ships sold for demolition this year have increased dramatically, tankers have been absent. Since last July tanker scrap prices have plummeted from a record $765/ldt to around $325/ldt (Bangladesh) today, and this will continue to come under downwards pressure with the abundant supply of tonnage available from other sectors.

Gibson said that “With earnings across most tankers sectors often below operating costs, sustained negative returns should hurry a significant number of tankers for scrap – but how quickly? So far this year just 1.9 million dwt has been sold compared with 2.6 million dwt over the corresponding period last year. This equates to just 32 tankers (10,000+ dwt), which is the same number required to be demolished on a monthly basis if we are to eradicate most single hull tankers by the end 2010. Only 2 tankers were sold for demolition in July, both MR’s.GMS, the largest cash buyer of scrap tonnage, has warned that the prices on offer could drop below $200/ldt as more tonnage is offered for scrap.

The IMO adoption in May of the convention regulating the recycling of ships is unlikely to come into force in time to have any effect on the phase-out. However, already the authorities in the subcontinent are implementing restrictions which could place further barriers, particularly applicable to tanker sales.Hellenic ship owners have been the most active thus far through the year, selling for scrap a total of 102 ships of various types. Second place is occupied by the Chinese with 66 ships leaving the global fleet, with the Japanese taking third place with 51 ships, followed by Indian ship owners who sold 31 ships for demolition said Cotzias. From the total of 591 ships, 200 were dry bulk carriers, 216 containerships, 71 were tankers, 19 were reefers, while the remaining 84 were passenger carriers and RO/ROs. Among the latest Hellas-based owners to scrap part of their older fleet was Mr. Antonis Komninos, head of Target Marine, selling an 1981-built containership. Also, Costamare of Cpt. Vassilis Konstantakopoulos, scrapped an 1980-built containership, while Laskaridis Shipping sold a 1981-built reefer.