This article is from "Sinde Maritime ", author Suwan
The booming container market has led to the delay in dismantling of hundreds of old container ships. But as the shipping market began to fluctuate, scrap steel prices were at a record high, whether to dismantle container ships or not has become a problem for shipowners to worry about?
Currently, the number of potential ships in the shipbreaking market has risen to an all-time high. According to Braemar ACM Ship Brokerage, there are currently about 730 container ships with a age of 23 years and above, and have reached the average age for ship scrapping.
Most old container ships have a scale of less than 2000 TEU. In terms of ship count, these 730 ships account for 13% of the entire fleet, which means there are many container ships waiting to "retire".
Workers in a shipbreaking yard in Bangladesh are working, but this year no container ship was sent to the country to demolish
Is it the right time to demolish the ship?
So far this year, the shipping market and chartering market are still at the highest level, so the shipbreaking market is still inactive.
Braemar ACM data shows that the price of regular charter is 396% higher than the 5-year average, and the spot market freight for container shipping is 250% higher than the 5-year average. The company said that this is why the shipbreaking market is now in a sluggish state.
Braemar Container market analyst Jonathan Roach predicts that the arrival of larger and more specialized container ships will have an impact on the container shipbreaking market.
Hapag-Lloyd CEO Rolf Habben Jansen pointed out that things may change soon. There are signs that the shipping market has reached its highest level. The first volatility in the shipping market is emerging, with freight rates from Asia to Europe down 30% from their peak earlier this year. The doubled dismantling high price did not attract ship owners. This year, only one
Due to the lack of scrapped container ships, ship dismantlers have been raising the dismantling price. The current sale of container ships will also benefit liner companies from the highest demolition price in history.
But so far, the high scrap prices have not attracted shipowners to abandon their old ships.
Braemar ACM data shows that since the outbreak of the new crown epidemic, the price of container ship dismantling has doubled, and the price of ship dismantling has recently exceeded US$700/ldt, a record high.
However, the number of abandoned container ships is still almost zero. This year, only one container ship was dismantled, the "Matsonia" with a load of 1,700 TEU of dwt, a container ro-roll ship owned by Matson, the United States. It was built in 1973 and was sold to an Indian shipyard for dismantling in January this year.
In addition, only 18 container ships with an average size of 800 TEU were demolished in 2021.
Data provided by Clarkson Research for Xinde Maritime Network shows that so far this year, no container ship has been sent to dismantle. Only 16 ships were sent to demolition in 2021.
See who will give in first?
The possibility of box ship scrapping may increase next as more new container ships are delivered.
Jonathan Roach pointed out that as larger and newer container ships gradually replace old-fashioned, traditional Panama-type container ships, the "ship dismantling effect" will appear.
If trade demand is sluggish in the next few years, this may bring more possibilities for shipbreaking.
This year, about 148 container ships with a age of 23 years or more are about to usher in the special inspection period, with 173 ships in 2023 and 150 ships in 2024.
Jonathan Roach said that this number shows that there are a lot of potential ships to be demolished and we will wait and see which will see who will make a profit from the high price of scrap steel first, which will be interesting.”
Clarksons also predicts that shipbreaking activities will increase in 2023, when the dismantling tonnage may reach 164,000 TEU.
This will be a milestone fluctuation in recent years, but it is still pale in comparison to the peak year of 657,000 TEU dismantling volume in 2016.
Braemar ACM said that the owner's decision to dismantle the ship will largely depend on whether the container ship's revenue remains strong, although shipping revenue may decline from the end of 2023 to 2025. Therefore, it is expected that the volume of container ship dismantling will rise between 2024 and 2026 to adapt to the trend of large-scale and specialized ships.
