There appears to be no let-up in the appetite for containership scrapping, with 88, representing some 275,000 teu, sold for demolition already this year, according to the latest data from Braemar ACM.
This is more than double the 43 vessels (154,500 teu) scrapped in the same period of 2016.
Thus it would seem the industry is on course to achieve another new scrapping record, which would greatly assist the supply and demand rebalance necessary to quell periods of extreme freight rate volatility across the world’s tradelanes.
However, according to the London shipbroker, the past weeks have seen “a sharp drop in demolition prices”. Braemar notes that sellers expecting to achieve approximately $400 per LDT on a “delivered basis”, might now struggle to get $380.
Braemar said there were a number of factors causing the decline: the upcoming monsoon season in the Indian subcontinent; a weakening of local currencies against the US dollar (especially Bangladesh); and, not least, a drop in steel prices following a reduction in demand for iron ore.
Moreover, the recent spike in charter rates, particularly in the embattled panamax sector that also pushed up asset values, has prompted some shipowners to delay or defer scrapping plans.
At the Seaspan Corporation first-quarter results presentation on 27 April, the containership owner’s chief executive, Gerry Wang, noted that spot hire rates for a 4,400 teu classic panamax had leaped from a below-operating-cost level of $4,000 per day in February to over $10,000.
Mr Wang said Seaspan had confidence that a market upswing had begun and that customer container lines agreed.
“They are looking to lock in low rates for long-term charters, while our preference is for short-term higher rates,” he said.
Mr Wang confirmed that Seaspan had re-evaluated its scrapping plans for its panamax fleet, due to the more favourable trading conditions.
“The market upswing has been really strong and we want to take advantage,” he said.
If sustained, the rise in daily hire rates for panamax vessels will be reflected in the revised asset values of ships. For some time the vesselsvalue.com database has shown the ‘live’ value of elderly panamax containerships as being on a par with their demolition value – but this could be about to change.
Meanwhile, in a recent analysis of the container market, Peter Sand, chief shipping analyst at BIMCO, noted that, in terms of future supply, so far this year “only eight ships have been ordered, all at Chinese shipyards” and these were all small vessels of 1,750-2,150 teu.
However, there is still a significant backlog of newbuild container vessels due for delivery this year and next, some of which have already been the subject of negotiated deferrals that could upset the supply/demand balance.
Indeed, Mr Sands cautioned that the orderbook still contained ships totalling around three million teu of capacity, 80% of which are stemmed for delivery this year.
