Bulkers of over 20 years old have been in hot demand this year and Chinese buyers have acquired more than half of them, according to research.
Much of the buying activity has been fuelled by interest in deploying the vessels on trading routes affected by geopolitical conflicts, which come with premiums associated with sanctions and war insurance, according to Intermodal Shipbrokers.
This means trade with Russia and certain parts of Ukraine and also the Red Sea where Houthi forces have been attacking vessels in retaliation for the Israel-Palestine conflict.
Intermodal said this has contributed to rising premiums for ships transiting the Red Sea, reaching 1% of the vessel’s value.
So far this year, the Athens-based shop has tracked 60 sale-and-purchase deals for bulkers built in 2004 or earlier, of which 37 have been acquired by Chinese interests.
Buyers in Greece, United Arab Emirates, Turkey and Vietnam have also picked up elderly bulkers this year, according to Intermodal data.
“Notably, Greek interest in such vessels remains minimal, with only three vessels being acquired,” Yiannis Parganas, head of Intermodal’s research department, wrote in a market report.
However, Greeks have been the biggest sellers of these older bulkers, offloading 19 vessels.
Chinese sellers have taken second place with 17 deals.
“New environmental regulations, including the recent implementation of the EU ETS [Emissions Trading System] system, are expected to accelerate the disposal of very old vessels, which, in the long term, will pose an increasing challenge for owners wishing to trade in international waters,” Parganas wrote.
“In 2022, war-related premiums played a significant role in the acquisition of such older ships. Looking ahead to 2024, it is possible that domestic shipping could justify some of the Chinese interest in ageing vessels.”
Demolition activity remains low, which means the average age of the global bulker fleet has risen from a low of 8.5 years in 2016 to the current 12.3 years.
“Several factors contribute to the reluctance of owners to demolish their vessels, including a favourable freight market, which offers profitable opportunities, particularly for premium-related routes, as well as challenges in the steel industry in key Indian-subcontinent nations,” Parganas said.
