BIMCO: Demolition of Panamax Containerships Spikes

Demolition of containerships almost tripled in the first five months of 2016 in comparison to the same period of 2015 as the shipowners attempt to counter the fundamental imbalance between supply and demand under poor container shipping market conditions, according to BIMCO.

A total of 150,863 TEUs of panamax ships (ranging from 3,000 to 5,999 TEUs) have been demolished so far in 2016, this equals the number of the same type of ship scrapped from June 2014 up to and including December 2015.

One possible explanation behind the higher demolition in the panamax segment since January 2016 is their potential redundancy – due to the opening of the new locks of the Panama Canal on June 26.

This will soon allow neopanamax containerships with a maximum beam of 49 meters to pass through.

“Throughout 2016 very poor market conditions stemming from excess supply has triggered higher demolition activity,” Chief Analyst, Peter Sand, said.

“Given the stubborn growth of global demand, increased scrapping is the way to diminish the gap between supply and demand in the containership market. BIMCO is therefore raising its forecast for containership demolition from 250,000 TEUs to 400,000 TEUs for the whole of 2016,” Sand said.

Furthermore, due to an oversupply of container shipping capacity and ongoing lack of global demand, time charter rates for the panamax segment went down by 63.5% from the monthly average of USD 15,800 per day in March 2015 to a monthly average of USD 5,755 per day in July 2016.

“As the global demand for containerships in 2016 is not expected to grow at the pace needed to match excess containership capacity, it is challenging for time charter rates to improve. Going forward, multiple years of low fleet growth – in the form of demolition and low contracting activity – will then improve the market,” according to Sand.

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