With ship demolition rates picking up considerably over the course of the past few months, this could be a prime time for many ship owners to finally scrap their older bulkers, especially if surveys are on the way for them. Already, Capesizes offered for scrap have diminished to just 13 so far in the year, versus 40 last year, as per data from GMS, the world’s biggest cash buyer of ships. In its latest report, the company noted that “continued (increasing) positivity in prices reflected an increasingly bullish international ship recycling market for yet another week. During the corresponding period last year, there was talk of a potential ship recycling recession as several yards went bankrupt and prices teetered on the precipice in the low USD 200s/LDT. There was also talk of levels possibly declining into the USD 100s/LDT (the first time in nearly two decades). However, what a turnaround we have witnessed in a matter of 12 months as prices now escalate beyond the mid USD 300s/LDT, with anticipation running high that even USD 400s/LDT might appear on the horizon, should the current trend persist. There has certainly been a slowdown in the number of available candidates – 40 capes were sold by this time last year as compared to only 13 so far this year – as charter rates have improved significantly and owners are finally beginning to see better returns on their vessels”.
Nevertheless, as GMS noted “there were sales to report into all sub-continent markets this week, from a variety of different sectors. Containers from the German market especially seem to have slowed and it would certainly seem difficult to replicate the relentless pace with which vessels from this market were being concluded. Steel plate prices from nearly all markets (except Turkey) have once again ended the week on an optimistic note and with currencies settled and demand turning rampant, it should be an extremely busy period until the inevitable monsoon slowdown from May starts to hinder the ongoing pace. While owners may invariably try and eek out the last available income on their older assets after so many loss making and bleak years of earnings. However, for those units with surveys due, now would be an ideal time to cash in on a booming ship recycling market.”
In a separate note, Allied Shipbroking said that “the flow of demo candidates continues to be slow, helping push breakers to upkeep their firm offers as they try to attract the few candidates that come to market. The competition is intensifying quickly and at the same time is well supported by the still holding firm local prices of steel plates. Support continues to also be found by the favorable exchange rates, though for the moment the key aspect of the market will continue to be the lack of available units. This means that the increased competition has meant a rise in speculative offering, something that surely brings an element of risk back to the market and in the case that things start to take a corrective turn, we could see a situation were a number of buyers are left once again exposed with tonnage purchased at excessively high levels. For the moment however things seem to be holding and given the trends in the freight market, they should continue to hold at least until the start of the monsoon season”.
Similarly, Clarkson Platou Hellas said that “prices have dramatically improved again previous week and whilst units are being proposed, generally the market remains starved of tonnage with mainly the smaller miscellaneous vessels being circulated. The main continuing factor behind the lack of tonnage supply remains a surprising buoyant freight and secondhand market where sentiment is currently showing positive signs. In particular, the supply of Bulk carriers is on a much smaller scale compared to last year. Further emphasising this is the fact that the number of Capesize bulkers sold at this point last year is considerably down from the same time scape last year ie. a remarkable 40 vessels in 2016 versus just 10 sold so far this year. Even container units are suddenly finding interest for further trading and therefore frustrating the market even more. With increasing second hand values of vessels, Owners eyes are certainly being diverted away from the recycling market which is causing fresh tonnage in the market to find fierce competition amongst the cash buyers as demand intensifies. Recently we have been questioning whether the cash buyer’s speculation is being justified by the numbers on offer from the waterfront. Well, it would seem from reports that the end recyclers are apparently becoming sceptical and concerned with the lack of tonnage availability and this, balanced with the improved domestic steel markets, could see upward movement in rates for the short term future. The ship recycling industry is certainly critical to the ‘supply and demand’ scenario and with demand evident from all the major destinations at this current period, the slow supply could force prices up further”, the shipbroker concluded.
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Source: GMS
