Containership scrapping to pick up in 2016

Containership scrapping is expected to intensify in 2016 as charter market demand for Panamax ships is bound to remain muted based on the recent forecast from Drewry.

Drewry bases its argument on the rising demolition prices for scrapping which were kept pretty low throughout 2015.

Hence, the amount of scrapping halved in 2015 with only about 195,000 TEU worth of capacity removed from the world’s cellular fleet, well down on the previous three years from 2012 to 2014 when the annual scrapping totals averaged nearly twice as much.

The gap between the supply and demand was further deepened with the record intake of newbuild containerships (1.7 million TEU) in 2015.

“Last year, owners of older scrapping candidate ships preferred to extend their lifecycles because demolition prices were less attractive and because there was some renewed demand for Panamax ships, either for second-hand sale or time-charter as a consequence of a spurt of new regional services in the early months of the year, particularly in Intra Asia, and to cover the US West Coast port dispute,” Drewry says.

December was the peak month for scrapping last year when a rush of activity resulted in 15 vessels contributed about one-quarter of the year’s scrapping total.

195,000 TEU removed from the world’s cellular fleet in 2015

According to Drewry’s available data for 2016, another 19 ships (58,000 TEU) were demolished in January and February. What is more, of this year’s units to be sent to the ship graveyard 12 were under 20 years of age and nine had capacities of at least 4,000 TEU, suggesting that more ships are coming onto the scrapping radar.

This trend looks to be continuing as more recently it has been reported that Zodiac Maritime has scrapped a couple of 6,000 TEU units for around USD 290 per ldt in Bangladesh, representing about a 10% premium on recent demolition prices.

“With demolition prices starting to pick up, combined with the general need to weed out unwanted capacity, we expect the recent trend to reassert itself in 2016 and 2017 and for scrapping totals to be more like they were in the years 2012-14,” Drewry adds.

Scrapping alone does very little to redress the supply-demand imbalance, but it does at least increase carriers’ ability to cascade smaller East-West operated ships into North-South trades by clearing space for them.

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