Containership Scrapping Maintains Record Pace
Containership demolition has reached an all time high, providing a positive surprise for the struggling container shipping sector.
A record high level of demolition activity in the container shipping has continued its pace throughout 2016, exceeding the expectations of international shipping association BIMCO
“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 BIMCO’s Chief shipping analyst Peter Sand. “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.”
“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,” Sand 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.”
According to BIMCO, so far 500,000 TEU have been scrapped in 2016. This is 4.2 times more TEU than the scrapping activity for the same months in 2015.
With the last three months accounting for more than 41 percent of the total demolition in 2016, the activity is picking up and is primarily generated by the Panamax container ships. The demolition of Panamax containerships in TEU accounts for 47 percent of the total demolition in 2016, while TEU scrapped from Intermediate and feeder containerships account for 30 percent and 23 percent respectively. The demolition of Intermediate container ships has had a great return from only being scrapped one month in 2015.
The demolition of Intermediate containership is a strong signal, for the measures taken in the container shipping industry, as they generally are bigger and younger than the Panamax and Feeder containerships.
The high level of scrapping comes on the heels of the lowest level of newbuilding contracts in 20 years, where container contracts, based on CGT, were down 84 percent for the first eight months of 2016 compared to the same months in 2015.
“The events in 2016 have shown that the tools to turn the container shipping industry around are being used and are working. The recommendations to consolidate fleets and demolish ships are being taken serious within the industry,” Sand said.
