Crude Oil Tanker Demolition Bucking the Trend -BIMCO
Four very large crude carriers (VLCC) have been sold for demolition since October 2016, matching the number of VLCCs sold for demolition in the preceding two years, according to BIMCO.
Most recently the 1999-built double-hull VLCC with the framing name Good News returned $15.5 million to the ship owner, as demolition prices have reached levels not seen since first half of 2015 ($400 per ltd).
“January struck an upbeat tone for demolition in all sectors, but the overall pace of fleet renewal, via demolition, has slowed down since then,” said BIMCO’s Chief Shipping Analyst Peter Sand.
“Crude oil tankers being the one exception to that as capacity removals spiked in April, reaching the highest level since February 2015.”
Sand continued, “Still a long way to go though, as net fleet growth for the large crude oil tankers are already up by 2.4 percent year-to-date.”
VLCC demolition off to a strong start
Some 1.3 million DWT of crude oil tanker capacity has been demolished during the first four month of 2017, and BIMCO said it expects that amount to be 9 million for the full year. And as deliveries are seen on par with 2016, the crude oil tanker fleet is forecasted to grow by 3.7 percent for the full year.
The first four months of 2017 have seen eight crude oil tankers form for demolition, including two VLCC, two suezmax, three aframax and one panamax in total. In comparison to the nine total crude oil tankers demolished in 2016, eight sold in the first couple of months is positive, according to BIMCO.
Demolition of dry bulk ships on target
During the first four months of 2017, 5.7 million DWT of dry bulk shipping capacity has been demolished. Mostly capesize capacity has been taken out (53 percent of demolished dry bulk ships), but also handymax, where 1 million DWT was demolished. This is easing the high fleet growth rate seen for that specific segment in recent year.
For the dry bulk sector, the Baltic Dry Index (BDI) conducts the pace of demolition at large extent. While the absolute level is still low, improvements since the market bottomed out in February 2016 are mirrored by low demolition activity since July 2016 through April 2017.
Low interest in product tanker demolition
As 2017 is set to be a year where supply side growth will outpace demand side growth, much more needs to be done to limit the looming overcapacity in the product tanker sector, BIMCO said.
Significant slowdown in demolition of containerships
January saw the highest amount of TEU-capacity even demolished in the container shipping sector, as almost 100,000 TEU was sold off, half of which was old-panamax ships.
The trend since then has been a clear slowdown. April was an 11-months low, as 12 ships were demolished. Out of those 12 ships, three of them were in the ‘Intermediate’ category of ships with a beam exceeding the 32.3 meters, that of a panamax ship.
Demolition of larger ships is a new trend, as the first ship with a capacity exceeding 6,000 TEU was demolished in March 2016. The intermediate sized old-post-panamax ship that was demolished was a 1997-built 5,006 TEU containership.
The evaporated hype is in line with the BIMCO forecast of a significantly lower level of demolished container shipping capacity in 2017 as compared to 2016, that had 654,410 TEU removed from the active fleet by demolition.