Demolitions return to the MPV market, although low compared to historical levels
MPV time charter rates have fallen since the highs of the previous year. Operators who were able to find employment for vessels at the high end of the age profiles in the fleet, are now deciding to send vessels for demolition.
Although the near future will see demolitions increase, the low orderbook indicates that the supply of vessels could tighten with growing demand, and demolition candidates will again fall. These are some of the key findings from Drewry’s recently published Multipurpose Shipping Forecaster report.
Robust demand for moving project cargo will continue to support multipurpose (MPV) shipping, enabling charter rates to remain substantially above pre-pandemic levels, in contrast with the competing sectors of dry bulk and container ships. But these projects are not suitable for all ships that fall within the MPV category. As a result, the demolition candidates are mainly the larger MPVs with low crane capacity, which have found themselves competing for cargoes with container and dry bulk carriers. Smaller vessels, Project and Premium Project Carriers will able to find employment much easier based on our vessel demand forecasts.
When we published our report, the yearly demolitions had already reached 91kdwt, of which 67kdwt were MPVs of low crane capacity. Our expectation is for this figure to more than double by the end of 2023 and increase by a further 35% in 2024.
The number of demolition candidates is low by historical levels, when we consider years like 2015 when demolitions reached 809 k dwt, followed by 516 kdwt in 2016 and 552 kdwt in 2017. Scrapping levels have decreased since then, with the exception of 2020 when covid-19 lockdowns caused a sudden drop in vessel demand (see chart). The increase we see this year and our projections for the 2024 are still low by historical standards.
We expect demolition candidates to decline again after 2024, due to low numbers of deliveries bringing a tightness in supply. In 2025, our expectation is for increase demand and vessel utilisation, which will bring an increase in TC rates, the lack of supply will most likely result in operators still finding employment for vessels which would otherwise be sent for demolition, hence reducing the number of demolition candidates.
You can find more details on the MPV orderbook, deliveries and demolitions in Drewry’s latest Multipurpose Shipping Forecaster report, as well as detailed analyses of vessel demand, supply, day rates, operating costs and values under various economic activity scenarios.