Despite being beset with technical challenges and shipowners opposition, the implementation of the IMO Ballast Water Management Convention (BWMC) might provide the basis for a dry market recovery, according to Maritime Strategies International (MSI)
Following the regulation’s entry into force on September 8, 2017, all affected ships will be required to install a ballast water treatment system by 2022.
BWT plants and their installation involve a significant amount of capital expenditure, with the level varying depending on the type and size, usually based on flow rate of the system and the technology selected, with cost ranging from USD 0.5 to USD 2 million for a bulker. This is, according to MSI, a source of concern for the industry and individual owners alike.
Some vessels requiring a special survey in 2017 will be obliged to fit a BWT system, extending to all vessels with a special survey in 2018 and 2019. With the cost of a Capesize third special survey in excess of USD 1 million plus the additional outlay for retrofitting a BWT at around USD 1.5 million, MSI said that the alternative of scrapping a 15-year-old vessel at USD 6.7 million will look appealing to many.
“In light of both the prolonged depressed state of the market and the imminent entry into force of the convention, we expect almost 100 million dwt of bulkers to be removed over the course of the next four years to 2019,” Will Fray, MSI Senior Analyst, said.
“We expect deletions to be frontloaded because owners will be almost immediately impacted by the parlous state of the market and have one eye on the entry into force timeline,” he added.
By the end of this year, MSI expects 40.1 million dwt bulkers to have been removed from the dry bulk fleet, with scrapping falling to 26.6 million dwt in 2017.
According to MSI, scrapping over the course of 2015 to 2017 will exceed all other historical triannual totals not only in dry bulk but also across any individual shipping sector.
“This combination of low deliveries and high scrapping will be the driving force that will help pull the sector off the floor and provide a foundation for a recovery that will gain momentum at the start of the next decade,” Fray said.