The oversupply of vessels is now a common notion in today's shipping environment. Most analysts seem to conclude that one of the long-term solutions to help alleviate the problem in the short term and eradicate it in the long term is the increased demolition of older vessels. Thankfully for the future of shipping, owners also seem to share the same thought. According to data from Clarksons, total global demolition soared in 2011, when 40.4m dwt of vessels were sold for scrap. Additionally, during the first half of 2012, 28.3m dwt of vessels were scrapped already in excess of the total volume in full-year 2010.
Taking a look at the latest demolition activity, Athenian Shipbrokers mentioned that "last week passed with slow activity and hesitation from all major markets with Chinese yards holding back with no intention to bid due to the decrease of steel prices, showing little to no reported activity, pushing tonnage towards the sub - continent. The Indian and Pakistani markets moved in a similar manner although the decrease in prices was not as dramatic as in China. Bangladesh remained the only market where buyers showed an actual interest to bid, however it remains to be seen if yard capacity will be able to uphold the current interest. despite a positive court ruling this Monday in india which allowed the notorious 'oriental nicety' (ex - Exxon Valdez) to be beached, sentiment does not appear to improve and yards as well as cash buyers remain hesitant towards a highly volatile market" said the shipbroker.
In a separate report, shipbroker Golden Destiny noted that in "the demolition market, the potential closure of Indian ship recycling industry and the drop in steel prices keeps the scrap price momentum at low levels with some signs of recovery, while currency in India is again loosing ground against dollar. Offered prices are now around at $370-$380/ldt for dry/general and $400/ldt wet cargo in the Indian subcontinent region, while China offers levels below $350/ldt for dry/general and about $350/ldt for wet cargo. India keeps winning some demo sales for its scrap yards given the uncertainty of the pending Supreme Court ruling in the coming days for banning vessels entering Alang unless any hazardous or toxic wastes had been removed. The court is due to rule on Monday whether the 214,000dwt M/V “ORIENTAL NICETY” (ex-Exxon Valdez) built 1986 would be allowed for disposal in Alang. There are hopes that the Indian shiprecycling industry will remain open and will not face long term closures as Bangladesh with potential stricter regulations imposed" said the shipbroker.
It added that "the week ended with 19 vessels reported to have been headed to the scrap yards of total deadweight 739,621 tons. In terms of the reported number of transactions, the demolition activity is down by 10% from previous week’s business with 70% lower dry bulk carrier disposals, while In terms of total deadweight sent for scrap, there has been a decline of 49%, while tankers are holding the lion share, 32% of the total demolition transactions. India is on the frontline by winning 9 of the 17 total demolition transactions. In terms of scrap price levels, notable demo deals in the wet and container markets for vessels disposals at levels $422/ldt including bunkers. At a similar week in 2011, demolition activity was 37% lower than today’s levels, in terms of the reported number of transactions, when 12 vessels had been reported for scrap of total deadweight 557,302 tons with bulk carriers 66% of the total number of vessels sent for disposal. Scrap prices were floating at stronger levels with India offering $525/ldt for dry and $550/ldt for wet cargo, while Bangladesh market was inactive" the report concluded.
Finally, according to shipbroker Intermodal, "despite the court ruling from the Supreme Court in India bringing positive news and helping subside all the recent worries that were circulating the market, demo prices were unable to reflect any positive movement. It is not however all clear sailing from here on out. The excess supply of demo candidates continues to keep things under pressure, while as many demo yards close in on their full capacity buying interest could well decrease over the next couple of weeks. At the same time there is still limited support from the current commodity price levels which is causing a more bearish sentiment to circulate amongst cash buyers. Prices have decreased slightly, with prices for wet tonnages now ranging between levels of around 330-410$/ldt and dry units seeing levels of about 310-380$/ldt" Intermodal concluded.