Scrapping set to rise
IMO 2020 is expected to increase the number of containership demolitions, but progress has been slow thus far.
The relentless upwards charge of Brent crude in 2019, which last week briefly passed $75 on the back of anticipated supply challenges before easing off, is an obvious concern for containership operators that are at the same time in the dark over the starting price of the more expensive low-sulphur fuel oil mandated for the start of next year.
Last week’s news that the US will cease granting waivers for the import of sanctioned Iranian oil will contribute to carriers’ rising operating expense in the short-term, but it is the lack of visibility into the extra fuel costs associated with IMO 2020 that is making it harder to plan much further ahead.
One such area of uncertainty is with demolitions. Drewry has long expected that IMO 2020 will trigger much greater scrapping of containerships as many older and less fuel-efficient ships will be rendered uneconomic. The rapidly increasing move towards fitting exhaust scrubbers could force charter rates down for some ships that are not fitted with the system, potentially swelling the number of demolition candidates.