BIMCO: Demolition Activity Rising Again

Global demolition activity increased by 16% in the first nine months of 2016 in comparison to the same period of 2015, as shipowners struggle to counter the imbalance between supply and demand in the market, according to international shipping association BIMCO.

A total of 36.2 million dwt was demolished in the first nine months of 2016, with most of it taking place in the first four months of 2016. This is equal to 21.8 million dwt or nearly twice as much as in the following five months of 2016.

However, comparing the period May – September 2016 in the same period as last year, the growth of demolition activity adds up to 2.9 million dwt or 26%. Therefore, the decrease in scrapping from the fourth until the ninth month of 2016 can be accounted for by cyclical demolishing activity.

“The poor global economic situation, as well as the depressing outlook for most of the seaborne shipping sector caused by excess supply of capacity, needs to be countered by a drastic increase in demolishing activity in order to lower merchant fleet growth,” BIMCO’s Chief Shipping Analyst Peter Sand said.

Comparing the period between January through September 2016 to the total previous year’s, the amount in dwt is a record in the making, as 94% is already scrapped in the yards.

In reference to the available data from the beginning of January 2014 through September 2016, the average demolished ship size in dwt increased on a year-on-year basis by 32% in 2015 and additionally 13% in 2016.

“The trend for the demolition of bigger ships can be explained by weak global demand, especially for containerships in 2016, which is not growing at the pace needed to match excess containership capacity. Another factor is the expansion of the Panama Canal, which takes the uniqueness away from the panamax ship segment,” Sand added.

From the beginning of January 2014 through September 2016, the dry bulk segment accounted for 72.9 million dwt or 66% of the total demolition, while crude oil tankers accounted for 8.6 million dwt or 8% and containership demolition accounted for 14.2 million dwt or 13% of the total demolition.

All other ship segments accounted for 10.7 million dwt or 10% in the period from January 2014 through September 2016.

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