Dive Brief:
- Containership scrapping progressed at breakneck speeds in 2016, as 201 vessels accounting for 699,000 TEUs were sent to the scrapyard over the course of the year, according to data from Braemar ACM first reported by The Loadstar.
- In the 30 days between Nov. 21 and Dec. 30 alone, 102,000 TEUs were scrapped. In comparison, only 187,500 TEUs were scrapped in all of 2015.
- The record scrap levels were due to similarly record low charter rates for panamax-class vessels, which are valuing at or below $4,000, according to The Loadstar — a similar value to what the ship could be sold for scrap.
Dive Insight:
The low charter rates and industry overcapacity may have pushed containership scrapping to record rates, but it does not mean the industry's main purpose is to reduce capacity.
Rather, as the rising number of idle ships drag on charter rates and lines invest in new technology, larger or more specialized ships, the cost-benefit analysis indicates scrapping is being used to pay off debt, in part. At least that appears to be the case for shippers like Rickmer's Maritime, which recently sent a 7-year old, 4,250 TEU vessel to the scrapyard amid a debt crisis.
Further, orderbooks remain full: Alphaliner data shows the top 100 shipping lines have ordered 228 new vessels for a combined 2.66 million TEUs in capacity, which represents 30% of currently owned capacity and 2.8 times more than what was scrapped in 2016. Maersk Line alone has ordered 27 new ships for 367,130 TEUs.
Yet, vessels take years to get built and order backlogs are common. If the current rate of scrapping, consolidation and other sources of efficiencies proceed, the shipping industry's market rates may well recover by the projected year, 2020.
