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Scrapping makes a comeback as smaller containerships lose their appeal

OWNERS of older and smaller ships are likely to renew their interest in scrapping as the charter market makes an unexpected U-turn, says London's Loadstar

Scrapping makes a comeback as smaller containerships lose their appeal
14 August 2018 - 19:06

OWNERS of older and smaller ships are likely to renew their interest in scrapping as the charter market makes an unexpected U-turn, says London's Loadstar.

Indeed, the dramatic recovery in panamax rates seems to have come to an abrupt end, with charter party daily hire for recent fixtures coming down US$1,000 to $12,500 in the past month, said the report.



Containership recycling has been in the doldrums for most of the year as owners sought to reactivate ships as daily hire rates surged with the lack of smaller ships, the absence of new orders and a scrapping lull.



Alphaliner expects a continued 'weakening trend' until September, when higher liner freight rates and a cooling in oil prices could tempt carriers back into the market for tonnage to cover additional loading requirements.



The latest idle tonnage report by Alphaliner records 131 ships of 500-5,100 TEU in hot or cold lay-up seeking employment, compared with just 56 in February.



The Paris consultant notes an 'alarming increase in spot tonnage under 1,000 TEU', with some 25 ships seeking fixtures, more than double the number it recorded in mid-June.



Alphaliner's idle tonnage total at July 23 was 142 vessels for 341,229 TEU, representing 1.6 per cent of the global fleet. At the end of May, the numbers were 85 vessels for 205,829 TEU.



Notwithstanding the usual seasonal downturn in fixtures, a rush of service cancellations and mothballing of new services by ocean carriers scrambling to turn a profit has weakened demand in recent weeks and reversed the upward trend in daily hire rates.



One London broker told Loadstar his owners were 'frustrated' at the sudden turn in the market.



'Only a few months ago they were in the driving seat and able to dictate terms, but now we are struggling to get extensions and enquiries are low.



'We are hoping the liners don't take more radical action after the peak season, as this will put more pressure on hire rates and conditions,' he said..

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