Ship demolition numbers surged in 2008, kept trend in 2009

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Friday, 13 February 2009

Ship demolitions rallied during the last two months of 2008 (November-December), especially when it comes to dry bulk carriers. According to data compiled by Drewry Shipping, a total of 4 million dwt tons of bulkers were sold for scrap, out of which 2 million dwt occurred in November and 1.34 million dwt in December. It’s worth mentioning that during the nine month period of January – September a mere 48,000-dwt was sold, with eight months showing no activity whatsoever. In fact, this trend powered on through 2009. According to DNV the volume of tonnage (all ship types involved) sent for recycling in only the first month of 2009 was more than 40% of the total recycled in the whole of 2006. About 125 vessels from the international shores are lined up at India’s Alang ship breaking yards as against 40 vessels in the whole of last year. Mr Vishnu Gupta, President, Alang Ship Breaking Industry Association, said recovery of steel scrap this year was estimated almost double at about 12 lakh tonnes. “However, breaking charges have fallen to $250-300 a tonne from $600 a tonne last year,” he added. On an average a ship weighs about 10,000 tonnes to 30,000 tonnes depending upon the capacity. “Alang is bracing to set a new record by dismantling the highest number of ships in 2009 as more than 600 ships are available for breaking in the international market due to the current economic recession,” said a trader. According to figures compiled by George Moundreas & Co. the average weekly volumes of dry bulk tonnage that left the market during the last week of 2008 for scrap was increased at 600,000 dwt, versus 400,000-500,000 during the weeks before. Further to that, the broker reports that negotiations are currently taking place for the scrapping of at least 157 vessels with a capacity of a stunning 5.5 million dwt. This could mean that by the end of 2009 a “healthy” 10 percent of the global dry bulk tonnage may have exited the market. At the same time, what’s rather encouraging is that scrap prices for dry bulk carriers remain at a healthy $230-275/ldt. According to GMS’ latest report, “with the unending increase in the supply and variety of tonnage in the market, recyclers continue to be very selective about what they buy and at what price. As a result, Cash Buyers are having a hard time getting competitive prices for “smaller” ships, e.g. handies and smaller. On the other hand, a well‐maintained panamax or larger vessel tends to generate a significantly stronger interest”. Examining the effect of the recent increase in freight rates, GMS indicated that it “raises the possibility of a slow‐down in scrapping volumes. Should this happen, it will certainly we well timed and help demo markets to catch its breadth and bring some price stability. Conversely, should the supply continue at current rates, we can expect a small price correction”.