Liner and recycling sector observers have been talking for months about an impeding mass scrapping of container ships as operators right-size their fleets to fit a downsized freight market.
So why is this clear-out still not happening?
Sales of container ships for recycling are happening, but apart from one mass sale of 10 ships by Taiwanese owner Wan Hai Lines in January, the pace has been a mere trickle with at most one or two ships sold for recycling each week since the beginning of 2023.
Last week, MSC Mediterranean Shipping Co sold the 3,922-teu MSC Veronique (built 1989) for green recycling in India at an undisclosed price, according to the latest market report by Singapore-based cash buyer Wirana Shipping Corp.
The Swiss liner giant bought the ship from Greece’s Niki Shipping in September 2021. Given its age at the time, it is unlikely that MSC acquired the ship with a view towards it having a long tenure in its fleet of more than 700 container ships.
MSC continues to be a prolific buyer of secondhand container ships despite persistent market talk of the need to trim fleets because of overcapacity. It has acquired seven since the beginning of the year.
During the same time frame, the company has only recycled three ships including the MSC Veronique. The 1,879-teu MSC Floriana (built 1986) and the 2,098-teu MSC Giovanna (built 1987) were both sold to “handpicked” Hong Kong Convention-certified recyclers at Alang in February.
Clearly, MSC’s owned fleet is not being trimmed.
Chief executive Soren Toft said in late February that while the company planned to send some older ships to be recycled, it preferred to reduce the size of its chartered fleet rather than sell off ships to match vessel supply with demand.
The same applies to almost all mid-sized and major liner companies — most have been holding on to their tonnage.
Lay-ups preferred
TradeWinds reported on Friday that liner companies are opting to idle their newer, larger ships rather than sell them.
According to the latest Alphaliner data, the commercially idle container fleet comprises 122 ships of 721,300 teu. Of this tally, 29 vessels are owned or chartered by Maersk with a combined total of 281,400 teu. MSC has 13 commercially idled vessels amounting to 119,000 teu.
Container chartering brokers believe that although freight rates have come down significantly, they are still at a profitable level.
“Rates will have to fall below operating costs before we see a wider move towards scrapping,” said one Singapore-based container chartering broker.
Rohit Goyanka, director of Singapore-based Star Asia Shipbroking said that strong buying interest for smaller container ships out of China, Indonesia and the Philippines has also removed potential candidates from the recycling market.
“These are the players who were unable to buy ships when vessel values were high. They are looking at demolition class vessels that they can buy cheaply,” he said.
In addition, Goyanka pointed out that during the recent bull run many vessels owned by tonnage providers were fixed out on long periods that have yet to reach the end of their tenure.
“Most of the existing charters are due to run out in May to June. Some German owners are marketing ships with charters attached that stretch until 2024,” he said.
Recycling sources told TradeWinds that only two container ships are currently being circulated in the recycling market. AP Moller-Maersk is said to be sounding out the market for the possible sale of one unnamed ship, while Wan Hai Lines has invited offers for the 1,501-teu Wan Hai 282 (built 1998).
AHTSs axed
The dearth of available recycling tonnage applies to all market sectors, with the MSC Veronique being the only ship of any significant size sold for recycling over the past week.
The three other ships sold for recycling on the Indian subcontinent were all quite small.
Qatari offshore player Halul Offshore is reported to have sold two medium-size anchor handling tug supply vessels, the 5,500-bhp Halul 22 (built 2003) and the 6,000-bhp Halul 27 (built 2008) for recycling at Alang. No pricing details were disclosed.
Pakistan, which has been absent from the market for many weeks, has managed to stage a small comeback with a recycling facility in Gadani acquiring Sharjah-based Jubba General Trading Co’s ancient 4,800-dwt product tanker Madina 1 (built 1979).
