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Shipping: demolition increase within the dry bulk segment

World Cement,

The dry bulk market has long suffered from weak freight rates stemming from falling demand and an oversupply of ships. However, despite worsening freight market conditions, the demolition of dry bulk tonnage has not been adapting fully to this trend as could be expected, at least until now. During 2014 bulk carriers equalling 16 million dead weight tons (DWT) were sold for demolition, down from more than 23 million DWT in 2013.

Scrap prices are under pressure from a general diminishing demand for steel in addition to cheap steel coming out of China. With low scrap prices, currently around US$370 per light displacement ton (LDT), owners are more reluctant to let go of their ships despite being pressured from poor freight market conditions. However, data from the first four months of 2015 shows that more owners are scrapping their ships than ever before.

Since the beginning of 2015 demolition has gone up for all of the ship sizes within the dry bulk segment, with Capesizes carrying the lions share. In 2014, 25 Capesize ships totalling more than 4.2 million DWT were scrapped. With not even half of the year behind us the numbers have already more than doubled. During the first four months of 2015, 52 Capesizes with a total DWT of around 8.7 million have been sold for demolition. The numbers are hastily approaching the level of 2012 when a record total of 70 Capesize ships where scrapped.

Chief Shipping Analyst at BIMCO, Peter Sand, says: “The high amount of Capesize demolition will benefit the segment. Although increasing scrapping was expected, the actual development exceeded BIMCO’s expectations. This could have a positive impact on the market.”

The demolition of Panamax ships has also been on the rise in 2015 and, although the development is not quite on par with the Capesizes, it is still substantial. In 2015 as much as 2.6 million DWT has already been sold for demolition equating to more than half of last year’s total when 4.8 million DWT was scrapped.

For Handymax and Handysize, demolition has also increased in 2015. For Handymax, just over 1 million DWT of tonnage has been scrapped so far in 2015, 34% more than the same period last year. For Handysize the numbers are 2.2 million DWT so far, up 79% from last year.

“The increase in Capesize scrapping comes at a much needed time for the market. Looking at the development so far this year the fleet growth has actually been negative, with a reduction of 0.8%,” adds Peter Sand.

Source: BIMCO. Adapted to house style by 

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