Ships scrapping activity to double in 2010 says Clarkson

Wednesday, 03 February 2010

In a positive note for the overcapacity problems of the global fleet, leading research house Clarkson said that total scrapping activity is expected to more than double during 2010, surpassing the 60 million tons mark. During 2009, which also recorded one of the fastest pick up of demolition activity, a total of 29.88 million tons of vessels was scrapped. Lower freight rates and a huge orderbook in most ship types across the industry led many ship owners to scrap their older vessels, in an effort to pave the way for their expected new buildings.

Based on Clarkson figures the 2009 scrapping figures were the highest in a decade as 246 dry bulk carriers were scrapped, together with 188 tankers and 180 container ships. Their average age stood at 29 years old. Just for comparison 2008 saw the scrapping of just 377 ships with a capacity of 13.2 million tons, with an average age of 30.5 years old, a bit higher than those scrapped last year. In fact, most of them leaving the world’s fleet during the last quarter of the year, when the economic crisis broke out, leaving the shipping industry stunned. Scrapping figures from other sources vary, but it seems that approximately 30-35 million tons of shipping capacity left the fleet last year.

According to shipbroker consultants N. Cotzias Ltd., 34.6 million tons of carrying capacity were removed from the market. During the whole of 2009, India got the lion’s share in terms of units acquired with 473 ships, China came in second place with 271 units, Bangladesh was third with 211 units and Turkey finished in fourth place with 105 units. Average prices for the whole year were around the $270 per ton mark and that number includes the price offered by Turkey.It is worth noting that over the last 12 months (and despite the huge increase in ships sold for recycling) prices in all markets have recorded substantial increases: India +43%, Bangladesh +38%, Pakistan +29% and China +43%.

These prices could prompt even more owners around the world to move forward into 2010 with new deals, as many analysts have feared a potential oversupply of tonnage. As Hellenic Shipping News Worldwide earlier reported, the trend set last year in terms of scrapping deals, should be maintained, in order for the market to recapture its balance and together with an increase of trade activity set its sights at higher levels of freight rates and thus earnings for ship owners.

This prediction coming from reputed analysts seems to be verified. Estimates from Cotzias indicate that a rather hefty 1,812 dry bulk carriers are expected for delivery from shipyards during 2010, versus a mere 593 vessels last year, when many owners delayed their deliveries. Newbuilding deliveries are expected to drop back at 1,255 in 2011, before returning at healthier levels with 476 scheduled deliveries in 2012 and 101 in 2013, although there’s still plenty of room for these numbers to increase, as owners could return to placing orders by the second half of 2010. But, at the same time, Clarkson estimated that 2010 could very well be the year when iron ore trade will surpass the 1 billion ton mark, an unprecedented record.