BIMCO: Increased Crude Oil Tanker Demolition a Positive Sign

Illustration; Image Courtesy: Bahri

A total of 1.3 million dwt of crude oil tanker capacity was sent to the scrapyards during the first four months of 2017, heading to the expected demolished capacity of 9 million for the full year, according to BIMCO.

The year so far has seen eight crude oil tankers form for demolition, including two VLCCs, two Suezmax, three Aframax and one Panamax. As only nine crude oil tankers got demolished in 2016, “eight sold in the first couple of months is positive,” according to BIMCO.

Most recently the 1999-built double-hull VLCC, with the framing name Good News, returned USD 15.5 million to the shipowner, as demolition prices have reached levels not seen since first half of 2015.

“January struck an upbeat tone for demolition in all sectors, but the overall pace of fleet renewal, via demolition, has slowed down since then. Crude oil tankers being the one exception to that as capacity removals spiked in April, reaching the highest level since February 2015,” Peter Sand, BIMCO’s Chief Shipping Analyst, said.

Sand added that there is “still a long way to go” as net fleet growth for the large crude oil tankers is already up by 2.4% year-to-date, and it is forecast to grow by 3.7% for the full year.

Regarding the scrapping activity in the dry bulk segment, 5.7 million dwt of dry bulk shipping capacity was sold for demolition during the first four months of 2017. Of the total, 53% of demolished capacity were dry bulk ships, followed by Handymax vessels of which 1 million dwt was demolished.

Additionally, as 2017 is set to be a year where supply side growth will outpace demand side growth, “much more needs to be done to limit the looming overcapacity in the product tanker sector,” BIMCO said.

While January saw the highest amount of TEU-capacity demolished in the container shipping sector with almost 100,000 TEU sold off, the trend since then has been a clear slowdown. April was at an 11-month low, as 12 ships were demolished.

Demolition of larger ships is a new trend, as the first ship with a capacity exceeding 6,000 TEU was demolished in March 2016. The intermediate sized old-post-panamax ship that was demolished was a 1997-built 5,006 TEU container ship.

BIMCO said that the evaporated hype is in line with its forecast of a significantly lower level of demolished container shipping capacity in 2017 as compared to 2016, that had 654,410 TEU removed from the active fleet by demolition.

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