Scrapping of boxships gathers pace

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Janet Porter - Wednesday 22 April 2009

CONTAINERSHIP demolition activity is increasing sharply as owners take whatever action they can to eliminate unwanted tonnage as cargo demand remains slack and freight rates are at rockbottom.

However, as newbuilding deliveries continue at a record pace, scrapping is unlikely to have any significant impact on fleet capacity. Instead, many lines are still relying on lay-ups or more short-term tonnage removal schemes to keep supply under control.

The exact number of idle boxships is difficult to verify at any one time. Vessels are constantly being withdrawn and then returned to service as lines revamp their networks.

The world’s largest carrier, Maersk Line, confirmed this week that it currently has 12 ships out of action, most of which are 5,000 teu-6,500 teu, while several more are either being prepared for lay-up or have been identified as future candidates. At the same time, some units that had been left at anchor are now being brought back into service.

That puts the Danish line at the top of the table regarding idle tonnage, followed by APL and then Chile’s CSAV, which has five 6,500 teu vessels currently unemployed because of a service shutdown.

No ships of this size are being sent to the breakers, with the largest scrap candidates being a handful in the 4,000 teu-5,200 teu category.

Most of the ships being sold for scrap are in the 2,000 teu-3,000 teu size range, with an estimated 56,000 teu likely to be deleted this year.

Maersk Broker now expects total boxship demolition to reach 240,000 teu in 2009, which is double its earlier projection. The 2010 forecast has been revised from an earlier figure of 70,000 teu to 140,000 teu.

So far this year, 77,896 teu of containership capacity has been sold to breakers, according to Maersk Broker.

Higher scrapping levels are having a modest impact on fleet growth, with the 2008 figure adjusted very slightly from 13% to 12.9% as a result of more demolition. Capacity expansion for 2009 has been revised downwards from 14.9% to 13.5%, while the 2010 figure is now expected to be around “a manageable” 10.6% rather than 11.2% previously.

For all size categories up to 3,949 teu, fleet expansion this year will be in single digits thanks in part to more scrapping. In contrast, fleet growth for vessels in excess of 11,000 teu will be 133% as this new generation of vessels starts to enter service.

Ordering activity remains at a complete standstill, with March the sixth consecutive month of zero containership contracting. That has reduced the size of the orderbook to 45.5% of the existing fleet compared with 47.1% a month ago, according to Maersk Broker.

Shipyards remain under huge pressure to either delay deliveries or even accept some cancellations, while rumours persists that some owners are struggling to meet their financial commitments.

Lines are having a difficult time forcing freight rates up, particularly those that handle a large amount of spot cargo for freight forwarders.

While carriers with large beneficial cargo owner accounts are having more success obtaining some increases in their Asia-Europe service agreements, others say spot rates have slipped back over the past week by about $50 per teu.

This follows some very modest gains of $100-$200 that were achieved at the start of the month, when most lines announced rate restoration programmes.