Tanker scrapping during 2016 won’t go down in history for breaking any records. With most ship owners having relatively young fleets after the investment spending of the past few years and the hope that the market’s slowdown would turn around on the back of increased demand, demolition activity was limited. After all, earnings remained in healthy levels, so there was no actual urgency among ship owners.
In its latest weekly report, the first of the new year, shipbroker Gibson said that “without the sale of two VLCCs in the final quarter of last year, tanker deadweight recycling totals would have been only slightly above the 2015 final figure. In deadweight terms tonnage sold for demolition in 2016 amounted to 2.46 million tonnes, just 33 units (25,000 dwt+). Once again healthy earnings across most tanker sectors did little to encourage scrapping”.
According to Gibson, “the extremely young age profile of the tanker fleet also discouraged scrap sales and newbuildings entering the market were initially absorbed with minimal impact until the latter half of the year. In contrast, demolition sales of bulk carriers and the container ships contributed around 350 and 200 units respectively, as poor trading conditions continued to dog these markets. The collapse in scrap prices which started in 2014 continued and by January last year, lightweight prices on offer had fallen to below $300 tonne for tanker tonnage”.
The shipbroker added that “over the final few months of 2016 lightweight prices started to recover, but failed to attract an influx of new tanker candidates despite softer tanker earnings. However, scrap values for India/Pakistan are still considerably below the circa $500/tonne range witnessed in September 2014. Of the 33 tankers sold last year, Pakistan breakers took exactly one third, followed by India with 8. The oldest vessel sold for scrap was the Suezmax LEO (built USA 1978), which had been shuttling crude around the US Eastern seaboard for a couple of years. While the youngest, the VLCC XIN PING YANG (built 2001) just made it into 2016 figures, reportedly bound for Chinese breakers. In October, the tanker PROGRESS (built 1994) had the distinction of being the first “trading” VLCC to be sold for scrap for exactly two years. One interesting point is that 10 of last year’s sales were for disposal of single-hull tonnage, many of which had been lying idle for some time. In addition to the two VLCC sales, one Suezmax and seven Aframax were sold for disposal”.
Gibson noted that “for 2017 we anticipate tanker markets to be more challenging across most all sectors. The production cutbacks announced by OPEC back in November are due to be implemented from this month onwards. In addition, the influence of the 240 newbuildings which entered the fleet over 2016, and those still to be delivered over the coming months will also impact heavily on the tanker market. We also believe that the recent legislation on Ballast Water Treatment for implementation from September this year and the new lower sulphur limits from 2020 will all influence owners decisions whether to scrap although many owners may hold off to see if there will be exemptions or waivers applied. However, the expense of putting a vessel through 3rd special survey, coupled with the high additional costs associated with the new environmental regulations will provide owners with considerable food for thought over the coming months. NB: The VLCC VARADA BLESSING (built 1993) originally sold to Pakistan breakers in July 2014 but since detained under arrest in Hong Kong. The vessel has subsequently been re-sold for demolition in China and has not traded in the market since 2014. She has been excluded from our 2016 sales figures”.
Meanwhile, in the crude tanker market this week, in the Middle East, Gibson said that “a sharp VLCC dip before Christmas followed by a mid-holiday rebound that now has turned into a dead-cat bounce with rates sliding to as low as ws 60 to the East and low ws 40’s to the West. Owners will be hoping for some late January volume relief, but whether the remaining ammunition will prove sufficient to re-fire the market is open to question. An increase in Far Eastern delays would help.
Suezmax interest was dominated by short haul trades, and although there was initially a large amount covered, The ‘quality’ of the trade kept a lid on rates that then began to ease off to 130,000 by ws 90 to the East and little better than ws 50 to the West. Aframaxes moved through a dull period and rates steadily ticked lower to just under ws 90 to Singapore with little early change likely”.
Did you subscribe for our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Gibson
