Last Panamax Box Ship Escapes Scrapping

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A panamax container vessel idle for more than three years has finally left its berth in Brunei Bay, Malaysia – but it is not bound for a scrapyard.

What happened?

The 2010 built vessel ‘Cornelia 1’ was heading for drydocking and reactivation in Hong Kong, after securing time charter employment. It was reported to be the final non-operating owned panamax vessel to come out of mothballing and has been in a cold lay-up for 38 months.

Hard times

The Panamax sector faced a harrowing time after the expansion of the Panama Canal in 2016 enabled vessels up to some 12,000 TEU to use the waterway.

The carriers off-hired panamax ships in droves, replacing them with more economic, bigger vessels for routes through the canal. Without new charter opportunities and against a backdrop of heavy over-tonnage, hire rates and asset values dropped like a stone, impacting panamax shipowners, particularly the German KG companies.

Bankruptcy charges

Some shipowners, such as Rickmers Maritime Trust, that had focused their portfolios on a panamax fleet, were forced into bankruptcy and at the height of the sector demise in February 2017, more than 100 panamax containerships were idled in hot or cold lay-up.

And even if brokers were able to secure brief employment for the spot ships, daily hire rates were below operating costs, reaching a rock bottom $4,000.

Some 50 panamax containerships were sent to scrap yards in the last months of 2016 and early 2017, including the youngest ever to be sold for demolition, the mid-2010 built 4,250 teu Hammonia Grenada, purchased by Bangladeshi breakers in January 2017 for a reported $5.5m.

However, with a virtually empty orderbook and continuing robust demand, particularly on secondary trades, panamax ships have been the industry’s star performers this year.

Daily hire rates for the newest, fuel-efficient panamax vessels have soared to up to $15,000, with charterers asking for extension options and footing the bill for positioning. As a result, the value of the ships has jumped to match their potential earning power.

New leash of life

According to reports, the Cornelia 1 now has an asset value of $14.6m, compared with $7.6m in February last year. And its scrap value is now about $9.5m, making employment the far better option.

Notwithstanding the potential negative impact of the trade war between the US and China, analysts are of the opinion that secondary routes will continue to grow strongly and there may even be a spin-off of more trade. So the thinking is that the existing panamax fleet, with no threat of newbuilds, should continue to thrive in the immediate future.

Last year, some 150 containerships with a capacity of 431,000 teu were consigned for recycling, but this year, according to the latest data supplied by London shipbroker Braemar ACM, the number of ships sold for demolition by the end of August had reached just 21, for a capacity of 44,500 teu.

This was despite breakers paying higher prices and, as a consequence, analysts are now drastically revising their earlier predictions of a scrapping level of about 250,000 teu for this year.

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Source: The Loadstar

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