Tanker Scrapping to Remain Low

There has been a near absence of the demolition activity in tanker market this year, Gibson Shipbrokers said in its latest tanker market report. The scrapping likely to remain at low levels in the coming months, it added.

During the first ten months of 2019, only 30 tankers over 25,000 dwt were reported sold for scrap. About half of all demolition activity has been in the Handy/MR size group, with 17 units removed since the beginning of the year.

There were 3 Panamaxes/LR1s demolished and just 1 tanker in the LR2/Aframax size group. The count is marginally higher for larger crude carriers, with 5 Suezmaxes and 4 VLCCs sold for removals.

Gibson said that this  is in stark contrast to developments last year, when over 150 units were scrapped. However, this year’s dramatic decline in numbers is not surprising, considering that the pool of prime candidates for demolition has been considerably reduced following intense activity in 2018.

Weaker scrapping prices have also discouraged demolition, with lightweight values gradually falling from a high of $435/tonne in March 2019 to under $375/tonne in October, notably down from a peak of $465/tonne seen in early 2018.

Throughout this year, there also has been less willingness from Owners to send tonnage for scrap as expectations were running high that the rebound in the market is just around the corner.

In addition to actual demolition sales, Gibson has also observed an increase in VLCC floating storage demand in recent months, mainly for VLCCs around Singapore/Malaysia, as final preparations for IMO2020 got under way.

"According to our records, at the end of October 35 VLCC and converted VLCCs (FSOs) were involved in storage of crude, dirty petroleum products (including IMO2020 compliant bunker fuels) and clean products," it said.

Although this is quite a substantial number, the vast majority of these vessels have been involved in storage operations for quite some time.

In terms of tanker supply, nearly 110 tankers will be celebrating their 20th birthday next year, with figures being particularly elevated for larger crude carriers. Not all of these units will head for the beaches. However, trading conditions for ageing and inefficient tonnage will undoubtedly become more challenging, with the bunker base shifting to more expensive 0.5% sulfur fuels.