Demolition set for record year

Ship scrapping looks set for a bumper year in 2012 if early demolition figures are anything to go by.

2012 looks set to be a record year for scrapping

On an annualized basis that would be a 28% increase on the 39.5mdwt sent for scrap last year, or over 50mdwt.

“The market is awash with activity with a large volume of sales having been completed,” the ship broker says.

“If January is anything to go by, we are destined for a record breaking year as an enormous volume of tonnage has been sold.”

Indian breakers have been the main beneficiaries with a reported 2mdwt of tonnage already sold into the country this year.

If India maintains that pace for the rest of the year it could scrap in excess of 21mdwt, an annualized year-on-year increase of 55%.

China has reportedly already taken 1.2mdwt of ships for scrap and on an annualized basis looks set to surpass last year’s total of 8.5mdwt by 48%.

“If the Chinese market continues in the same vein as it did prior to the New Year holidays, then we could finally see a healthy market with attractive rates from all the major breaking destinations,” Clarksons says.

Pakistan has also seen a strong start to the year with 800,000dwt sent for scrap. That is already 20% of the total seen in the whole of 2011.

The broker says Pakistani breakers remain keen to acquire the larger tanker units and the combination of their more relaxed ‘gas free’ requirements and the currency issues hampering the price levels on offer in Bangladesh could lead to more of the larger units finding Pakistan as their only destinations.

By sector dry bulk looks to be leading the way so far with about 2.8mdwt broken up, while some 1.8mdwt of tankers have been scrapped.

At this rate large tanker scrapping could grow 82% on the 10mdwt seen in 2011 to 18.2mdwt this year, while recycling of handysize bulkers and above could reach almost 23mdwt.

Forecasts of up to 2.5mdwt of combos plus a further 6mdwt in small bulkers makes up the potential 50mdwt scrapping target for 2012.

The bigger units, VLCCs and capesizes, look to be slow off the mark with only a single VLCC and maybe two large bulkers sent for scrap.

Suezmax scrapping has started the year at a high tempo with 800,000-dwt making its way to a beach somewhere.

This is almost 75% of the amount of suezmax tonnage sent for scrap in the whole of 2011 and closer to 80% for that in 2009.

Some 900,000-dwt of panamax tonnage has already been sold for scrap so far this year, almost one-fifth of the quantity scrapped in the whole of 2011.

Khalid Hashim: upbeat on demolition prospects in the handysize sector

The slightly smaller handysize segment has seen the second highest level of demolition so far this year in the dry bulk sector.

Some 600,000-dwt has already been sold for demolition and on an annualized basis looks set to beat 2011’s level of 4.7mdwt by 24%.

Khalid Hashim, who’s Precious Shipping specializes in the sub-30,000-dwt segment, is certainly upbeat on the sector’s demolition prospects.

“If the freight markets continue at their current low, but volatile levels, we expect the world fleet in our sector to shrink roughly 5 to 10% per annum in the next few years,” he said in the company’s recent third quarter results report.

“This will help redress the current imbalance between supply and demand and allow rates to rise in a couple of years.”

Of course 2011 initially looked set to be a big year for capesize scrapping and certainly was until an improvement in rates late in the year.

Early indications pointed to a potential 100 capesizes hitting the beaches in the Indian subcontinent or China. In the end only 72 did.

Instead of sending their ships to the breakers many owners were prompted to carry on trading rather them.

With a flood of newbuildings, both wet and dry, entering the market this year, that scenario looks unlikely to be repeated.

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