Monday, 6 February 2012

Demolition scene roundup

.....the great white hope?

Shipping analysts are looking increasingly at a spike in shipbreaking to counteract the alarmingly high figures for new deliveries scheduled this year. These threaten to stymie any chances of even a short-term recovery in freight markets. As shipowners' profits come under greater pressure, many hope that low freight rates will encourage significantly higher demolition across trades; for now, this possibility seems to offer almost the only glimmer of hope.

Says Intermodal's Theodore Ntalakos "The orderbook for bulk carriers (bigger than 20,000dwt) still stands at just below 2400 bulk carriers, therefore we expect 2012 to be another difficult year", adding that the larger bulk carriers will suffer the most because of high scheduled deliveries. Things are better for tankers, although "we are still experiencing the digestion of the previously swollen orderbook," says Intermodal.

The situation seems to be murkier with boxships. Analysts feel that the larger container vessels- where new supply is concentrated- are more at risk than the smaller ones. The apprehension is that this segment, dependent heavily on the demand for finished goods, may find the going tough in the present economic climate anyway. 

Local developments in Bangladesh- that recently imposed a five percent tax on ships coming in for scrapping- have caused much disruption in that country's demolition businesses as shipbreakers boycotted all new purchases until the issue was resolved. The return of the Bangladesh market is vital to the industry, brokers at Clarkson Hellas say, adding that reports of the scrapping of two Chinese bulk carriers in Bangladesh "have failed to materialise."

In India, shipbreakers at Alang are just recovering from the recent steep rise in the value of the US dollar against the Indian Rupee; the INR has recovered somewhat since then. Bangladeshi issues and the Rupee recovery have meant that Indian breakers have regained the top spot in demolition activity, even though Pakistani breakers next door are offering more competitive rates for scrap. 

"China continues to provide a competitive streak for tonnage completing in the Far East area, however the fast approaching New Year festivities may, next week, ensure a quieter period envelopes the local scene. Currently however, prices levels remain anything from region USD 420-450 depending on the vessels specification" says Clarkson Hellas.

Analysts at Golden Destiny revealed indicative scrap rates last week. "Scrap prices for dry and wet units remain below $500/ldt in Bangladesh with hopes for a firmer rebound," they said. "Pakistan appears to be the most competitive with levels offered $455/ldt for dry and $485/ldt for wet cargo, while China seems to compete with the Indian sub continent region at scrap rates of about $430-$440/ldt". 

Twenty-two vessels are reported to be heading for scrapyards in the middle of January- around 800,000 DWT. India has been responsible for more than a third of this business. Recent activity across markets has, despite local issues, picked up considerably on a week-on-week basis, experts say. This is precipitated, no doubt, by the mini-collapse of the Baltic Dry Index in the last few weeks; a theory that is proved by the fact that the tonnage of bulk carriers headed for demolition has doubled on a WOW basis.  

The industry will be hoping that an even greater number of vessels are sent to the graveyard soon. With the tonnage overhang and new delivery figures being the biggest swords hanging over their heads, a sharp increase in demolition activity will provide a modicum of much needed relief.

1 comment:

  1. The main cause for breaking a ship down is that maintenance costs go up as a ship ages. Shipping companies also have to pay port charges, crew salaries and oil fees for their ships, so when they are no longer economically viable they are sold to ship recyclers who strip the old ships down, salvaging anything of value.