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‘Frantic’ scrapping of younger vessels

Global – ‘Cash-strapped ship owners will scrap younger and younger ships this year as the dry bulk market wallows in the doldrums,’ the UK’s Drewry Maritime Research has stated in its latest report. A vessel as young as 15 years of age has already been sold for scrap in recent months while the average scrapping age of Chinese-built Capesizes was 21 years in 2012, it notes.

Drewry does not expect an improvement in the freight market in 2013, predicting that the number of bulk shipping companies getting into financial difficulty will only rise over the course of the year. ‘Demolitions in 2013 are expected to be above 36 million dwt, more than what was seen in 2012, and the average scrapping age will fall even further as middle-aged vessels struggle to find employment,’ the report elaborates.

Meanwhile, Handysize ships will be scrapped well before the 30-year mark in 2013. Driven by increasing obsolescence owing to expanding ports, ‘this sector lost a bigger proportion of its fleet to the scrapper’s torch in 2012’, says Drewry. Last year, the average scrapping age dropped from 32.4 to 30.1 years.

Demolitions in the Panamax segment were also ‘relatively high’ given its older age profile and the increasing popularity of the larger and younger post-Panamax design. According to preliminary data, as much as 32.7 million dwt of dry bulk tonnage was sold for demolition in 2012, including 6.8 million dwt in the fourth quarter – ‘more than double what it was in the last quarter of 2011’. With nearly 11 million tonnes of Capesize tonnage sent for scrap, the total easily exceeded all the dry bulk tonnage scrapped in 2009.

‘But even this frantic level of scrapping will not push freight rates up because the dry bulk fleet is growing even faster,’ notes Drewry. While 28 million dwt is due for delivery this year, two-thirds of that increase will come in the post-Panamax and VLOC segments. ‘These fleets are already very young, so there is very little chance that scrapping will ease the pressure on freight rates,’ the report contends.

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