Ship Scrapping Increases, but in Wrong Trades

Posted by George Backwell
Monday, May 19, 2014
File image

Although the number of vessels being scrapped this year has increased dramatically, and looks set to continue rising, it is having little impact on the current excess of supply over demand where it matters most – in the East-West trades, according to the latest edition of Drewry's 'Container Insight Weekly'.

All of the vessels scrapped so far remain below 6,000 teu, whereas the worst excess is in the sector over 10,000 teu, where most vessels are deployed between Asia and Europe. This means that unwanted ULCVs will continue to be cascaded into other routes, thereby maintaining pressure on freight rates.

Out of the 73 vessels scrapped up to the end of April, only seven were post-Panamax ships between 5,000-5,999 teu, with the rest being below 4,999 teu, which position has changed little since   The average size of vessel demolished over the four month period only reached 2,855 teu, compared to 2,288 teu over the whole of 2013, 1,868 teu in 2012 and 1,293 teu in 2011. In other words, only vessels deployed in fast growing North-South and intra-regional trades are being scrapped, which is not immediately relevant to East-West services.

Moreover, the amount of vessel capacity being scrapped still remains small compared to the total fleet capacity in service. Even if the current rate of scrapping were to be continued over the rest of the year, less than 4% of the world cellular fleet would be scrapped in 2014.

When analysing the subject, the temptation is to simply compare global cargo growth, which is not expected to exceed 5% this year, with global fleet growth, which will probably be somewhere between 5-6%, making this demolition rate look meaningful. For example, a hefty 40% of vessel capacity growth so far this year has been offset by demolitions.

But the comparison overlooks the uneven way that excess vessel capacity is being delivered. just over 50% of all newbuild capacity brought into service since the beginning of 2011 has been provided by vessels over 10,000 teu deployed on East-West routes.  The average provided by vessels below 5,000 teu, where most scrapping has been taking place, is just 17%. Moreover, the capacity of all vessels scrapped last year (i.e. less than 6,000 teu) only more-or-less equated to the newbuild capacity injected by vessels less than 6,000 teu.

The position is not expected to get any better soon, as 55% of all newbuild capacity on order up to the end of 2016 consists of vessels over 10,000 teu, and the world cellular fleet is expected to grow by 20% during the period, ignoring further demolitions and delivery postponements. Although some of the vessels between 6,000 -9,000 teu that they will displace will quickly fit into North-South routes, the majority won’t due to draught restrictions in such places as Africa, India, and South America. Dredging takes time due to environmental considerations alone.

Drewry's View
Current scrapping alone will not be enough to meaningfully address the current imbalance between supply and demand in East-West trades. As long as only ships below 6,000 teu continue to be demolished, North-South trades will be the sole beneficiaries.
 
Source: Drewry Maritime Research –  Container Insight Weekly

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Allcargo Groups Subsidiaries as ECU Worldwide

ECU Line, Econocaribe and China Consolidators undergoes rebranding to build a Global Brand Connect   India’s integrated logistics solution provider Allcargo Logistics

Damen Opens US Office

Damen Shipyards Group has announced the opening of a new branch office in Houston, Texas. This expansion, under the name of Damen North America, meets the increasing

French PM: Aussie Subs to be built in Australia

French Prime Minister Manuel Valls said on Monday he was committed to building all of a new Australian submarine fleet in Australia, apparently contradicting the

Contracts

French PM: Aussie Subs to be built in Australia

French Prime Minister Manuel Valls said on Monday he was committed to building all of a new Australian submarine fleet in Australia, apparently contradicting the

Asia-N.Europe Box Rates Jump 170 pct

Shipping freight rates for transporting containers from ports in Asia to Northern Europe jumped 170 percent to $732 per 20-foot container (TEU) in the week ended on Friday,

NAT Acquires Four 150,000dwt Tankers

Nordic American Tankers Limited ("NAT" or the "Company") announced today that it has entered into an agreement to acquire four existing Suezmax sister vessels built in Japan at a world-class shipyard.

Ship Sales

French PM: Aussie Subs to be built in Australia

French Prime Minister Manuel Valls said on Monday he was committed to building all of a new Australian submarine fleet in Australia, apparently contradicting the

NAT Acquires Four 150,000dwt Tankers

Nordic American Tankers Limited ("NAT" or the "Company") announced today that it has entered into an agreement to acquire four existing Suezmax sister vessels built in Japan at a world-class shipyard.

How France Sank Japan's Sub Dream

Ousting of Japan ally PM Abbott opened door to rivals; Tokyo slow to respond to new competitive process. In 2014, a blossoming friendship between Australian

Container Ships

Allcargo Groups Subsidiaries as ECU Worldwide

ECU Line, Econocaribe and China Consolidators undergoes rebranding to build a Global Brand Connect   India’s integrated logistics solution provider Allcargo Logistics

USCG Sets 2nd Round of Hearings for El Faro

The U.S. Coast Guard will conduct a second round of public hearings May 16-27 for the Marine Board of Investigation into the loss of the U.S.-flagged cargo ship El Caro, and its 33 crewmembers.

Asia-N.Europe Box Rates Jump 170 pct

Shipping freight rates for transporting containers from ports in Asia to Northern Europe jumped 170 percent to $732 per 20-foot container (TEU) in the week ended on Friday,

Vessels

VDRs Refit on UK Royal Fleet Auxiliary Ships

Danelec Marine informs it has supplied new-generation Voyage Data Recorders (VDRs) for three U.K. Royal Fleet Auxiliary (RFA) Bay-Class Landing Ship Dock (LSD) vessels.

Saga Shipholding’s Optimarin Experience Drives BWT Orders

Ballast water treatment (BWT) specialist Optimarin has signed a contract with Saga Shipholding for the provision of three of its Optimarin Ballast Systems (OBS).

Transport via Northern European ports more sustainable

On the European continent, the Alps form a natural barrier for international transport. Containers can be transported to Southern Germany, the Czech Republic or

Consulting

ICS Criticises 'Prestige’ Judgement by Spanish Court

At a meeting of the International Oil Pollution Compensation Funds (IOPCF) this week, the International Chamber of Shipping (ICS) has strongly criticised the judgement

V.Ships Wins Fortress Deal

V.Ships Offshore, part of V.Group has been awarded a ship management contract by Fortress Transportation and Infrastructure Investors LLC to provide full technical

Maersk Cuts Landing Certificate Issuance Time

* Maersk Line will introduce a simplified process for obtaining the Landing Certificates from May 1st , 2016   * Maersk line waives off the  Landing Certificate fee of INR 1000 Mumbai,

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1475 sec (7 req/sec)