News / Older vessels are 'nice little earners' – for the time being

12/12/2023

Boxship demolitions are not expected to surge until 2026 and 2027, according to Linerlytica’s latest report, today.

Liner operators continuing to deploy older vessels has pushed the average scrapping age to 27.3 years, up from the 24.2 average between 2010 and 2020.

The average age of the containership fleet today is 13.8 years, although it drops to 11.1 if calculated on a teu/weighted basis, due to the average larger ship being younger.

Among the top 15 carriers, MSC has the oldest fleet, with an average age of 16.8 years, while Maersk has the oldest fleet on teu/weighted terms, at 12.8 years.

Despite their aging fleets, carriers have been slow to scrap older tonnage, just 163,000 teu being sent for demolition this year so far, compared to 2,088,200 teu of new deliveries.

If the average scrap age were to drop to 24 years in 2024, up to a million teu of older tonnage would be removed.

However, such a high level of scrapping is unlikely, given the large number of ships that have been refurbished in the past three years.

Several liner operators have been upgrading or refurbishing ships, according to Linerlytica analyst Tan Hua Joo, who noted that Maersk and Evergreen had been the most active. Hapag-Lloyd and MSC have recently embarked on vessel upsizing: in October, CSSC Huangpu Wenchong Shipbuilding increased the MSC Hamburg from 16,000 teu capacity to 18,500 teu.

Drewry’s 2022 forecast of 600,000 teu of demolitions this year has not materialised, for several reasons, despite the weak freight market and attractive scrap prices offered by recyclers in the Indian sub-continent and Turkey.

One reason is that mainline operators are still competing for market share and have not been withdrawing substantial capacity.

Mr Tan told The Loadstar: “There will be demand for older ships as long as charter rates and freight rates generate positive cashflow for owners. Since most of these ships had received renewal surveys over the past three years due to the buoyant market, they can continue to trade until their next surveys are due.”