Ship Demolition Market Firms up as Both Prices and Demand are High

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The trend indicates that there will be yet another wave of mass ship demolition sales, with owners having to balance the pros and cons of their decisions, regarding their older vessels.

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Report from ship buyer GMS

Ships buyer GMS, in its latest weekly report, noted that the big news this week concerned Panama’s ratification of the Hong Kong Convention on the Safe and Environmentally Sound Recycling of Ships (HKC).  The fact that the flag controlling about 18% of the world’s fleet has signed up (the fifth nation to do so) is certainly a major boost to those in the industry and to those who have been championing the Hong Kong Convention.

GMS noted that some major yards in India have already received classNK approval, with more under process (along with those receiving RINA certification) as the importance and emphasis on green recycling in the Indian subcontinent markets comes to the fore once again.  Denmark has also said it is signing up to the Hong Kong Convention next spring after changes to its domestic laws, something that should send a strong message to other European (and global) countries to ratify and thereby enter the convention into force and embrace the core values of green ship recycling.  This comes at a time when the global shipping markets have been rocked by news of the Hanjin bankruptcy and the container sector in particular has responded by even scrapping a 10 year old vessel.  The faster the HKC is ratified and entered into force, the faster a global set of guidelines can be imposed for subcontinent markets to comply with – something that will only help to raise ship-recycling standards globally.

Current scenario

In the demolition market, shipbroker Allied Shipbroking noted that “with demo prices having risen considerably over the past couple of weeks and appetite amongst cash buyers holding firm, it was no surprise to see a sudden ramp up in activity this week.  Prices for dry bulkers having been touching on the 300 US$/ldt mark, a significant point for sellers, as we have not seen any price levels above this mark since late 2015.  At the same time there has been a big inflow of vessels from other sectors such as containerships, with many owners choosing a quick exit, as they have been feeling the pain from the poorly performing freight markets for quite some time.”

As such it didn’t take much in terms of improving scrap values to push them over to the beaching option.  It still feels as though these price levels are not holding firm and much of this rise has been driven primarily by speculative buying.  For the time being however it seems to be holding.

Shipbroker Intermodal Report

Shipbroker Intermodal said that sentiment in the demolition market remained very much positive for yet another week, with activity and prices continuing to firm, while the number of container vessels that come up as demo candidates in the market is still overwhelming. India has, after a long time, re-emerged as the top market player, with appetite on behalf of local breakers being massively supported by a firming India Rupee as well as scrap steel prices in the country that provide the confidence needed at the moment to end buyer to commit to current price levels.

As far as the supply of vessels is concerned, we reiterate our opinion that containers help activity remain strong in the following months as long as the freight market does not improve and of course in the light of the ballast water convention entering in force next year, while when it comes to demo prices, recent weakness seen in Chinese steel prices could be signaling a downward correction sooner rather than later.  Average prices this week for wet tonnage were at around 195-305 $/ldt and dry units received about 185-295 $/ldt.

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Source: Sea Job Hunt

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