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Ship Owners Shun Away from the Demolition Market

Despite enough potential supply of tonnage primed for demolition, it seems that the conclusion of deals has been elusive over the course of the past few weeks. Ship owners appear to be shying away from doing more deals with scrapyards. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “with Halloween taking place across the globe this weekend, it comes at a time when the market feels particularly eerie in terms of the lack of activity and tonnage that is available and concluded. It seems we have been saying this for weeks now, with no real momentum being built up at all and owners interests remain elsewhere”.

According to the shipbroker, “most units that may be workable are from the Offshore and Cruise sector where they remain the only two real depressed trading markets at this current time, but with the VLCC freight market starting to decline, the real possibility is that we could see this type of unit enter the market place during the remainder of this year. Surprisingly, despite what has been a fairly firm year for the Dry freight market, the number of Capesize/VLOC’s that have been sold has risen sharply since the Summer, where we now have 40 such units concluded for the year to date, compared to 29 in total for 2019. We still expect to see this increase before the year is out and it will be the most sold units of this ilk for recycling in a year since the extremely active 2015/16 when we saw close to 160 removed from the fleet list over this two year period. With China announcing at the beginning of 2019 that only Chinese flagged Vessels can be sold into the local yards for recycling, many did not see them coming back for some time and especially at the recently reported levels. They are now able to pay $350/per ldt due to a tax free benefit from the Government helping this price increase, which has resulted in some of the highest rates paid for many years in the Far East, but the chances of them being able to compete on the international market are still very slim with the Chinese government not expected to make a big U-turn on its Environmental policies. The international market does need China back, especially as these yards are approved by the EU and would possibly ease the burden on Turkey for such regulated vessels”, Clarkson Platou Hellas concluded.

Source: Clarkson PLC

In a separate report this week, GMS, the world’s leading cash buyer of ships, said that “following further bad news concerning the rapid and continued spread of Covid-19 in the Western world, leading to yet more lockdowns across Europe and other areas around the world, a momentous week lies ahead with the upcoming U.S. Presidential Election and its potential repercussions that could also be felt the world over. The U.K. has followed Germany, France and Austria in enforcing a four week lockdown, in the run up to Christmas and any hopes of a return to normality at the end of this year have been dashed by this news. Perhaps, shipping markets have yet to feel the full impact of these new draconian measures and the subsequent economic misery that is likely to follow for many. However, it is the outcome of the U.S. elections, which may have the bigger overall impact on the markets in the long run. Dry rates remain firm, despite the extreme volatility being witnessed in the Capesize Bulker sector, as Containers continue to fly, whilst there is talk of more Tankers being introduced for recycling from the New Year onwards. Indian sub-continent recycling markets have therefore seen the recent heat sustained, with some impressive numbers seen on an additional two VLOCs sold for recycling, whilst a larger Passenger vessel and Bulker have also been sold for levels into the high 300s/LDT, although USD 400/LDT on conventional units has yet to be breached. China has been the surprise story in recent times, paying into the mid-to-high USD 300s/LDT on domestic, state owned, Chinese flagged tonnage and a decent LDT FPSO was sold for levels even above those seen from Bangladesh last week, as the country makes rapid progress in the recovery from Covid-19. Finally, the Turkish market seems to be entering a state of stasis as the Lira rockets past TRY 8.0 this week, causing increasing caution in local sentiments and reticence from Local Buyers in offering firm numbers this week”, GMS concluded.

Source: GMS Leadership

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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