Shipowners have sent nearly double the number of ships to the breakers’ torch so far this year than last, spurred on by a combination of poor trading market and the high cost of regulatory compliance.
2020 started with many owners simply deciding to cut their losses and sell vessels for scrap, despite today’s depressed recycling prices.
Clarksons described the demolition market as “awash” with tonnage in the middle of February.
“Many owners are not hesitating to dispose of their older units amid the general downturn across freight markets,” it reported.
According to its figures, tanker scrapping volumes are up 22% this year, dry bulk demolition sales are up a whopping 142% and containerships by 50%.
The demolition tonnage figures have been bolstered by a large number of VLOCs and capesize bulkers that are sailing to scrap yards, with about a dozen sold to Bangladesh.
Coronavirus effect
But some market watchers believe the impact of the coronavirus outbreak, a dearth of beaching capacity and depressed scrapping prices could delay shipowners' decisions on recycling to the second half of the year, bringing the scrapping spree to a halt in the short term.
Some Bangladeshi yards are not allowing Chinese seafarers to disembark, which is putting some recent sales at risk, cash buyers said.
While other observers said beaching yards in India and Bangladesh do not have much more appetite for tonnage as they are full.
In addition, recycled steel prices in India and Bangladesh are also low, which means breakers need to see lower demolition prices to turn a profit.
Towards the end of February, demolition sales started to falter.
Broker Edward McIlvaney commented: "Regretfully, all the domestic markets in the subcontinent are under intense pressure due to the declining price levels locally, which have resulted in a substantial fall in the prices that are being paid in today’s market.
"This has resulted in a major slowdown, not only in the number of vessels coming onto the market but also in the number of sales concluded."
Prices lower in Europe
Tanker and bulker demolition prices are on average under $400 per ldt in India and Bangladesh, and lower in Europe.
In the growing green market in Europe, the 126,000-dwt Navion Hispania (built 1999) was reportedly sold to Turkey at a price of $270 per ldt, compared with an average recycling price of $395 per ldt in South Asia.
Brokers believe this combination of drivers could lead to a year of low recycling volumes similar to 2019, when only 17.8m dwt of tonnage was torched — one of the lowest levels in the past decade.
In an average year, demolition levels are between 30m dwt and 35m dwt.
Brokers suggest a further fall in prices could even tempt Pakistan back into the recycling market after it pulled out last year.
Pakistan breakers have purchased four bulk carriers this year, indicating they are preparing to return to the business.
