Demolition: Time to Take The Bitter Pill

Low freight rates should be the best incentive for owners to take the bitter pill and scrap some of the outdated tonnage in order to bring the necessary ease to the heavily oversupplied market, according to BIMCO’s Chief Analyst Peter Sand.

Freight rates have experienced a solid rebound from the 2016-lows, with rates for all trade routes being above last year’s equivalents when they hit the floor.

However, the increase is still too low to profit from as numbers are still below the industry average, Sand pointed out.

The short-lived rebound in charter rates has been attributed to the regrouping of major carrier alliances. Although, the benefits of the new network structures constantly being introduced by the carriers will take a while to realize.

The three alliances control 77% of global containership capacity and as much as 96% of all east-west trades. Still, it should be kept in mind that 57 % of all TEU-demand is generated by non-east-west trades, which have been particularly impacted by cascading.

Nevertheless, BIMCO expects the rates to drop somewhat again.

“Get rid of the ships that are no longer economically viable, few as they may be, and avoid getting back to the shipyards any time soon,” Sand insisted.

Touching upon the possible effect of the upcoming entrance into force of the Ballast Water Management Convention (BWMC) and the 2020 Global Sulphur Cap, Sand said the claim that a lot of ships may be demolished amid high retrofitting costs to make them compliant with the new regulations is basically “wishful thinking”.

Namely, as disclosed, there is a high level of preparedness of companies engaged in container shipping for the upcoming BWMC and they are ready to install whatever is needed to comply with the new regulations.

“It would be a mistake to believe that this is the silver lining that will save the industry prompting large scale of demolition, and we do not expect huge buildup of demolition on the back of the Ballast Water Convention or the 2020 Global Sulphur Cap,” he added.

World Maritime News Staff

Share this article

Follow World Maritime News

In Depth>

Events>

<< Jun 2018 >>
MTWTFSS
28 29 30 31 1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 1

TRANSTEC 2018

TRANSTEC 2018 welcomes participants to explore Russian Ports and Shipping development opportunities…

read more >

Europort 2018

From 15-17 May 2018, the 12th edition of Europort Romania willl take place in the IDU Hall in Constanta…

read more >

The 27th World Gas Conference

The 27th World Gas Conference is the leading global industry event and is the definitive gathering of influential leaders, buyers and sellers, policy-makers and experts from around the world.

You will hear critical business insights and lively debates on the most topical issues facing the global gas industry today and in the future.

From 25-29 June 2018, Washington DC is expected to host 12,000 attendees, 500 speakers and 350 exhibitors representing, more than 600 companies from 100 countries.

Presented by the IGU, this is the largest and most high-profile gas event that is conducted by the industry for the industry.

Read More

read more >

SMM 2018

This is a must-attend event – a unique opportunity to meet key players, display business strengths, establish new contacts and exchange…

read more >