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 Reporter October 2013 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Odfjell Finalizes LPG/Ethylene Joint Venture Deal

Following Odfjell SE’s May 16, 2014 announcement declaring the signing of a definitive agreement to form a LPG/E shipping joint venture, Odfjell today announced

Marorka Opens Offices in Copenhagen

Marorka announced it is currently expanding following a substantial injection of funds. The expansion plan was approved and Marorka will extend its worldwide network in 2014.

DP World Mulls Senegal Free Zone

DP World  is looking to develop a free zone in Senegal, Chairman Sultan Ahmed bin Sulayem said on Wednesday. Sulayem was speaking at an African investment event in Dubai.

Contracts

Odfjell Finalizes LPG/Ethylene Joint Venture Deal

Following Odfjell SE’s May 16, 2014 announcement declaring the signing of a definitive agreement to form a LPG/E shipping joint venture, Odfjell today announced

Australia, US Order Anti-ship Missile Decoys

Design of the next generation of anti-ship missile decoys is set to commence following the signing of two contracts between the Australian Defense Force and BAE Systems Australia Pty Ltd.

General Dynamics Bags $ 50 mi Submarine Contracts

General Dynamics Advanced Information Systems, a business unit of General Dynamics was awarded two contract modifications totaling $50 million to continue supporting

Container Ships

MOL Restructures Asia to S. Africa Service

Mitsui O.S.K. Lines, Ltd. (MOL) announced the restructuring of its existing Asia to South Africa liner services into two direct loops. One service will call South China,

Report on MOL Comfort Incident is out

In response to the casualty of “MOL COMFORT” which occurred on 17 June 2013, ClassNK established the Investigative Panel on Large Container Ship Safety, comprised

DMR Examines Container Terminal Congestion Issues

Container port congestion has been hitting the headlines recently, but the reasons for it vary widely and in many cases it is only a short term issue. Certain world

Vessels

MAN Propulsion Packages for New Trawler Series

Orders for five fresh-fish trawlers feature two different ship designs and MAN 6L27/38 engines and aft-ship equipment Icelandic owners, HB Grandi, Vinnslustodin hf.

General Dynamics Bags $ 50 mi Submarine Contracts

General Dynamics Advanced Information Systems, a business unit of General Dynamics was awarded two contract modifications totaling $50 million to continue supporting

Swissco Doubles Rig Fleet

SGX Mainboard-listed Swissco Holdings Limited an integrated, international marine services provider, today announced having completed the acquisition of four additional mobile offshore drilling units,

Consulting

DMR Examines Container Terminal Congestion Issues

Container port congestion has been hitting the headlines recently, but the reasons for it vary widely and in many cases it is only a short term issue. Certain world

IMO Takes Important Step Towards Electronic Certificates

In the future, the IMO member States should accept the use of electronic certificates. This is the request of the Facilitation Committee (FAL) and, hence, the road is paved for less paperwork,

ISS Chile Advising on Oil spill at Quintero Bay

Inchcape Shipping Services (ISS) Chile is advising of an oil spill at Quintero Bay, Nr Valparaiso, Chile, following an incident on Thursday 24th September at

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Pipelines Ship Electronics Ship Repair Sonar
rss | archive | history | articles | privacy | terms and conditions | 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: 0.1897 sec (5 req/sec)