LONDON : Although demolition levels declined year-on-year in 2017 so far, with a range of factors at play, recycling volumes are likely to remain at elevated levels in the medium term, Clarksons Research said.
In the year to date, 743 vessels of a combined 32.7 million dwt have been sold for scrap. In tonnage terms, demolition volumes have declined year-on-year by 20% on an annualised basis, from a firm total of 44.5 million dwt in 2016, despite an increase in scrap prices.
“This reflects an improvement in market sentiment, with some sectors beginning to move away from the bottom of the cycle,” Clarksons informed.
Bulk carrier recycling levels have declined following an extremely strong first half of 2016, when 22.6 million dwt was sold for scrap, compared to 211 units of a combined 14.1 million dwt in 2017 so far. This represents a 50% year-on-year decline in dwt terms, against a backdrop of improving bulk carrier earnings.
Meanwhile, demolition volumes in the tanker sector surged from around 2.3 million dwt in 2016, to 95 vessels of 9.5 million dwt in the year to date, due to a weaker earnings environment.
Containership demolition in 2016 reached 194 vessels of a combined 0.7 million TEU, the largest annual volume on record in capacity terms, driven in part by continued weak boxship earnings. In TEU terms, 46% of containerships recycled last year were ‘old Panamax’ vessels, rendered less competitive following the opening of the expanded Panama Canal locks in June 2016. Recycling levels in the sector have declined year-on-year by 35% in TEU terms to 137 units of a combined 0.4 million TEU in the year to date, but remain historically high.
Global demolition volumes have generally declined year-on-year, driven primarily by the bulkcarrier and containership sectors. However, Clarksons said that scrapping activity remains at historically elevated levels, and the costs of complying with upcoming environmental regulation “are likely to sustain this trend in the medium term.” This could continue to drive supply side rebalancing, potentially helping shipping markets to transition into the next stage of the cycle.