CMES scraps in China

Scrappers are paying just $327m per ldt for a Chinese-owned panamax

China Merchants Energy Shipping (CMES) is scrapping another Oshima-built panamax in China.

In an announcement to the Shanghai Stock Exchange, Chinese state-controlled shipowner China Merchants Energy Shipping (CMES) says it has been paid CNY 20.36m ($3.29m) for the Oshima-built 73,645-dwt Pacific Paradise (built 1993). Like sistership Pacific Prospect, which was reported scrapped four weeks ago, it has sailed in the fleet of CMES affiliate Hong Kong Ming Wah. Reference sources give its lightweight as 10,061 ldt, so the Chinese demolition price works out to $327 per ldt.

Scrapping the ship outside China would have yielded 50% better than that. Indian breakers were paying $490 per ldt for bulkers last week, according to the Seasure Shipping weekly demolition report.

The ship was delivered last Thursday to Dalian Shipbuilding Industry.

The book value of the ship based on 25-year depreciation is CNY 40.6m and the transaction will be booked as an operating expense of CNY 22.86m.

Since the ship was not reflagged to China, it will presumably not qualify for the Chinese government's subsidies for early scrapping of aging tonnage.

CMES announced in June that it intended to dispose of eight elderly bulkers over the next 12 months, and now notes that its dry-bulk fleet is undergoing a renewal programme. The company intends to charter in tonnage to make up for short capacity that may result from scrapping while it waits for delivery of newbuildings, and points to its orders late last year of 12 ultramax bulkers.

Third-party reports put that number at 16, including ten of 64,000 dwt on order at Chengxi Shipbuilding and six of 61,000-dwt split between Nantong Cosco KHI Ship Engineering and Dalian Cosco KHI Ship Engineering Co.