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Turkey a very active player in ship demolition market

Sunday, 24 Oct 2010It is reported that although ship demolition has flourished this year for the most parts of the shipping market, dry bulk ship owners seem to be lagging behind their tanker or container counterparts, demonstrating a reluctance to sell their older vessels for scrap.

Turkey a very active player in ship demolition market
24 October 2010 - 15:07

Sunday, 24 Oct 2010It is reported that although ship demolition has flourished this year for the most parts of the shipping market, dry bulk ship owners seem to be lagging behind their tanker or container counterparts, demonstrating a reluctance to sell their older vessels for scrap. The tiniest uptick of the dry bulk market is enough to postpone any scrapping decision, thus weighing down on dry bulk freight rates, which have been struggling to overcome the BDI’s 3,000 point mark, since collapse in June 2010.

Still, according to the latest monthly report compiled from shipbroker Golden Destiny exclusively for Hellenic Shipping News Worldwide, a total of 727 vessels of all types have been sold for scrap worldwide, since the beginning of the year. Their aggregate capacity stood at 20,506,743 tons, a figure described by Golden Destiny as quite robust when compared with the number of vessels scrapped during a similar period in 2009, which stood at 735 vessels equaling a total deadweight of 21,775,566 tonnes.

Golden Destiny said that "It seems that the Bangladesh closure has not steered the demolition activity in a tremendous downward trend, comparable with the volume of demolition transactions reported within a similar period of 2009, but the turmoil in Chittagong has hampered owners’ decision for scrapping their units regardless the higher scrap prices paid by the rivals India and Pakistan since the end of May. Tankers and liners are holding the biggest share of the market in terms of reported number of demolition transactions, at 32.5% and 24.5% respectively, with passenger and Ro-Ro carriers to follow. Bulk carriers and containers are in the last rankings holding 10% and 8.7% of the demolition market whereas during 2009 were in the spotlight holding 23.5% and 19% of the market. Overall, the demolition activity is up by 301.6% comparable with January to September 2008 period when demolition countries were paying USD 450 to SUD 500 per LDT for dry and USD 500 to USD 540 per LDT for wet cargo and Bangladesh with India were offering the most competitive prices whereas China was struggling to compete by offering USD 325 per LDT for dry and USD 375 per LDT for wet cargo."

During September 2010, 75 vessels were reportedly sold for scrap, equaling a total deadweight of 1,295,224 tonnes, while indicating a negative monthly change of 11.7%. Overall, in terms of reported number of transactions the demolition activity is down by 31.5% comparable with the volume of demolition transactions reported throughout September 2009, when liners where holding the biggest share of the market (32.4%) and Bangladesh with Pakistan were on the fringes of activity offering USD 300 per LDT for dry and USD 330 per LDT for wet cargo.

Golden Destiny said that "Nowadays, Bangladesh is still inactive while Pakistan is struggling to compete with India’s high scrap rates. After six months of stalled demolition activity in Bangladesh, there were some rumors circulating in the market for the beaching of two units in Chittagong, one chemical tanker and one Capesize vessel despite strong protests from BELA. This does not suggest a fully reopening of the market with the High court expected to be sit again in October 2010."

Ms Maria Bertzeletou analyst at Golden Destiny said that "The existing dry bulk fundamentals and the recent unexpected pick up in container charter rates during summer season seem that postponed owner's decision for scrapping their over aged vessels. In the bulk carrier sector, only 5 vessels reported to have headed to the scrap yards equaling a total deadweight of 269,272 tonnes indicating a negative annual change of 61.5% comparable with the number of bulk carriers scrapped within September 2009. In the container sector, the demolition activity is at even lower levels with 3 containers reported to have headed to the scrap yards equaling a total deadweight of 40,542 tonnes. In terms of reported number of transactions, tankers and liners are at the forefront holding a 26.3% and 39.5% share respectively of the demolition market whereas signs of positive movement have been witnessed in the Ro Pax segment with 13 units reported for scrap equaling a total deadweight of 155,058 tonnes."

In terms of scrap prices and volume of transactions, India continues to lead the market under the continued absence of ship breaking activity in Bangladesh and the Ramadan period in Pakistan, offering more aggressive bids than August. India offers USD 435 per LDT for dry and USD 465 per LDT for wet cargo while at the end of August was paying USD 395 per LDT for dry and USD 430 per LDT for wet cargo. The rivals Pakistan and China struggle with such bullishness by offering stronger levels. Pakistan is paying USD 410 per LDT for dry and USD 440 per LDT for wet cargo while China is paying $380/ldt for dry and USD 400 per LDT for wet cargo.

Finally, Turkey has emerged as a very active player of the market picking up smaller tonnage at levels at least USD 100 per LDT below India's rates with 30 vessels reported to have headed to its scrap yards. Furthermore, China achieved a remarkable firm price of USD 460 per LDT during the first week of October for a Capesize vessel of almost 132,000 DWT built 1982. The primary reason behind this high price achieved by China is the hefty quantity of fuel remaining on board, around 1,600 tonnes.

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