Drewry: Box Ship Scrapping rate should be higher
- Over 150 container vessels are expected to be scrapped in 2016.
- Demolitions are expected to reach 450,000 twenty-foot equivalent units this year.
- Maersk Line may scrap more vessels.
The consultancy firm Drewery observed that though a record number of around 150 container vessels are expected to be scrapped in 2016, it will not still be sufficient for an industry battling over-capacity, low demand, and falling rates.
In the year 2015, the demolitions were less than half of the expected 2016 level. It will still not be a real relief for the struggling container shipping industry. Drewry observed that it will only make a dent into the over-capacity built during the 2010-15 period.
Figure 1
Containership capacity demolitions, by quarter 2015-16 (teu)
This year, the demolitions are expected to reach 450,000 twenty-foot equivalent units. Based on an average size of 3,000 TEU for ships which are being scrapped, it means that about 150 mainly old and medium-sized container ships will be pulled out of the market.
In this scenario, the world’s largest container shipping company, Maersk Line, a unit in conglomerate A.P. Moller-Maersk, informed in February it would scrap more vessels and therefore begin to use four shipyards along India’s Alang beaches to handle it.
Figure 2
Average age of containerships sold for demolition vs normal depreciation life, by quarter 2015-16 (years)
The German container line Hapag-Lloyd warned investors that profit would fall in 2016 and signed a binding agreement with Arab peer UASC to form the world’s fifth-largest shipping company in response to a global industry crisis.
Container vessels are normally in service over 25 years. But some owners have pulled ships only 15 years old because the freight rates have been on loss-making levels.
Drewry noted that owners of older container vessels have to choose between chartering out ships at historically low and loss-making levels, or paying for idling costs until any market recovery – or simply scrapping the vessels.
Around 90% of the world’s goods are carried by sea – over 70 percent in containers carrying everything from flat-screen TVs to sportswear from Asia to the rest of the world.
It is to be noted that the container transportation growth was once easily outpacing economic expansion, but not any longer.
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Source: Drewry Maritime Research
