An eventful year for containerships in a volatile demolition market

An eventful year for containerships in a volatile demolition market

Overview

2014 turned out to be a very hectic year for the demolition market and it became clear just how volatile the market really can be. Previous experiences tells us the end of the year is usually one of the busiest moments for scrapyards, however in 2014 this effect was washed out by declining demolition prices.

2014 turned out to be a very hectic year for the demolition market and it became clear just how volatile the market really can be. Previous experiences tells us the end of the year is usually one of the busiest moments for scrapyards, however in 2014 this effect was washed out by declining demolition prices. Overall, the year was one of decline with less DWT and fewer TEUs scrapped compared to previous years.

Containerships

The container segment was one of the big surprises during 2014 with a very high scrapping activity in the year’s first half and a dwindling low one in the second. Container vessels have been a hot segment on the demolition market in recent years. The 1.1 million TEU scrapped the last three years alone covers half of the total sum since 1996.

The first peak in container scrapping came in 2009 as the financial crisis started to take effect. 378,000 TEU was scrapped that year, more than the previous 10 years put together. The two following years marked by the high activity in 2009 resulted in a substantial lower scrapping of container vessels. In 2013 the wheels had turned and container scrapping reached new heights when almost 200 containerships totalling 444,000 TEU were scrapped.

The initial estimates for 2014 were set relatively low at 250,000 TEU thinking the market might have peaked. The year however started at great speed and after only six months, the full year estimate was already met. The raised estimate aimed for a substantially higher ground, but as prices dropped, scrapping halted in the second half of the year. In perspective, almost 75% of the total 387,000 TEU scrapped in 2014 was done in the first six months of the year.

Bulkers and Tankers

Dry bulk carriers remain on the top of the list of tramp ships being scrapped when looking at total DWT. In 2014 almost 16 million DWT of dry bulk carriers were scrapped representing another steep decrease for the segment. 16 million DWT is less than half of the 33 million DWT scrapped in 2012 where the demolition was at its highest for this segment.

The demolition of crude oil tankers and oil product tankers has been relatively stable in recent years with 7.5-9 million DWT scrapped each year for crude oil tankers and between 1.5-3 for oil product tankers. The tanker segment also experienced a slight decline in 2014 as 6.6 million DWT worth of crude oil tankers were scrapped whereas the amount of oil product tankers was just under 1.5 million DWT.

Demolition Prices

“The big four” in the ship demolition business: India, China, Pakistan and Bangladesh accounted for 91% of all ship breaking in 2014 with India marginally larger than the other three. For three of the scrap consuming nations an old foe presented itself in 2014, in the form of cheap steel billets from China. The low iron ore prices and the fact that China’s extraordinary domestic growth has started to slow down, leaves them with extra steel for export markets. Most of these steel billets are going to India and the demolition market is feeling the effects. When 2014 entered into its second half scrapping prices were around USD 500 per LDT. At year-end prices had dropped into the low 400s. For the first weeks of 2015 the prices have continue to drop, currently placed in the high 300s. Both India and Pakistan have announced their intent to pose a tax on imported steel billets, but so far nothing has been implemented.

 
 

in Copenhagen, DK

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