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Boxship supply-demand outlook improves with accelerated demolitions

WITH containership demolition reaching record levels and with the lowest levels of newbuilding orders in 20 years, this will eventually bring some relief to container lines' woeful balance sheets if liner discipline is maintained, the Lloyd's Loading List reported.

Boxship supply-demand outlook improves with accelerated demolitions

WITH containership demolition reaching record levels and with the lowest levels of newbuilding orders in 20 years, this will eventually bring some relief to container lines' woeful balance sheets if liner discipline is maintained, the Lloyd's Loading List reported.

Boxship supply-demand outlook improves with accelerated demolitions
11 November 2016 - 07:21

Boxship supply-demand outlook improves with accelerated demolitions
WITH containership demolition reaching record levels and with the lowest levels of newbuilding orders in 20 years, this will eventually bring some relief to container lines' woeful balance sheets if liner discipline is maintained, the Lloyd's Loading List reported.
According to Bimco, demolitions this year have already exceeded 500,000 TEU of capacity which, on top of recent spot rate gains, is expected to give lines a further boost ahead of contract negotiations with shippers in the coming months.
Bimco said the pace of demolitions had accelerated for much of 2016, with scrapping through October this year more than 4.2 times more active than for the same months in 2015 and hugely exceeding the shipping organisation's forecasts.
Demolitions totalled more than 60,000 TEU in May and August, peaked at more than 80,000 TEU in September and came to just under 60,000 TEU in October. By comparison, in 2015 demolitions only totalled more than 30,000 TEU per month once, and were under 20,000 TEU on eight occasions.
"The demolition activity in the last three months' surprised BIMCO positively and it exceeded our initial expectation based on the appalling 2015 demolition activity," said Peter Sand, BIMCO's chief shipping analyst. "The advance is a push in the right direction, as demolition activity is one of the essential measures needed to be taken to rebalance the container shipping industry."
Last month, Jonathan Roach, an analyst at Braemar, estimated that some 670,000 TEU of capacity could be removed from the cellular fleet this year. "This comprises both post-Panamax 10,000 TEU+ vessels in the Ultra Large Container Ship (ULCS) sector, as well as the smaller Panamax and feeder ships," he said.
According to Mr Sand, only accelerated scrapping momentum will help redress the balance between supply and demand in liner capacity that has blighted carriers' financial performance in recent years.
"It is important that the demolition of excess capacity comes sooner rather than later, as there is still a huge delivery schedule hanging over the container shipping industry for the rest of this year and well into 2017-2018," he said. "However, the high demolition activity is currently softening the net supply growth rate of the container shipping capacity and will prevent a darker outlook for the years to come, if maintained".
The high level of scrapping comes in the aftermath of BIMCO reporting the lowest level of newbuilding contracts in 20 years with container contracts, based on compensated gross tonnage (CGT), down 84 per cent for the first 8 months of 2016 compared to the same months in 2015.
Bimco found that demolitions in the three months through October had accounted for more than 41 per cent of total demolitions in 2016, led by scrapping of Panamax ships rendered obsolete on many trades by the opening of the Panama Canal's larger new locks. Indeed, the demolition of Panamax containerships in TEU terms has so far accounted for 47 per cent of total demolitions in 2016, while TEU scrapped from Intermediate and feeder containerships has accounted for 30 per cent and 23 per cent, respectively.Hanjin unloading

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