Bulker scrapping slows

SCRAPPING in the dry bulk sector has slowed amid a gain in freight rates.

News ID: 80175

Date: 21 August 2018 - 09:15

BIMCO, the world’s largest shipping association, had expected 12m dwt to be scrapped in 2018, but only 2.6m dwt has been removed from the fleet so far this year.

“As opposed to the tanker markets, dry bulk owners have stopped scrapping ships, but we are still seeing a market recovery due to above-average demand growth,” said BIMCO’s chief shipping analyst Peter Sand.

“It is human nature that when you lose money for five years in a row, and now start making money, you won’t scrap any more,” he said.

The Baltic Dry Index, a measure of profitability that takes into account the capesize, panamax and supramax sectors, was assessed at 1,727 points on Monday, up from the year’s low of 948 points on April 6, and 1,230 points at the start of the year.

BIMCO observed fleet growth of 1.9% in the January to August period. That compares with previous expectations of 1% for the full-year.

Long-term demand growth is meanwhile expected at an average of 2% to 2021, according to BIMCO.

Golden Ocean’s chief executive Birgitte Vartdal said last week that she expected to see strong freight rates as demand continued to outpace supply.

In terms of new additions, the executive expected slippage as 39% of vessels “due for delivery in the next 12 months have not even started construction”.

Come 2020, when the International Maritime Organization’s regulations to impose low-sulphur fuel take effect, the level of demolitions may continue to be “worryingly low” because many owners are opting to install scrubbers aboard vessels, said Mr Sand.

Scrubbers allow owners and operators to continue to burn the less expensive high-sulphur fuel oil.

Clarksons is forecasting demand growth and vessel supply growth at 2.6% for 2018, according to its July report. That compares with trade growth of 3.9% and fleet growth of 3% in 2017.