Gettin’ Scrap Happy

This makes a good follow-up to Article 22. Let’s call them Items No. 4, 5 and 6.

Item Number 4 – From InforMare (Feb. 20, 2014) – “Boxship capacity growth to be offset by scrapping, delivery delays”

“New vessel capacity due for delivery this year, amounting to a record 1.65 million TEU and representing 9.6 per cent of the total global fleet as of January, will be offset by scrapping 500,000 TEU and 200,000 TEU in delivery deferrals. The flood of vessel scrappings and delivery postponements would cut 4.1 per cent off the forecast 2014 capacity growth rate and bring it down to 5.5 per cent, according to Alphaliner, which would be the lowest annual increase since 1999. Containership scrapping is expected to reach a new annual record spurred by the recent exodus of unwanted panamax ships, which are expected to account for more than half of the capacity to be scrapped this year. A record number of ships has already been sold for scrap in the last two months, led by Maersk and Hanjin Shipping, who are in the swing of disposing 27 vessels ranging in size from 3,600 to 5,300 TEU. They join Cosco who has scapped eight ships of 700-4,200 TEU in the past few weeks alone, with more disposals expected later this year.

“The disposal of unwanted ships, some as young as 17 years, will help slim down the idle containership fleet, which currently accounts for 4.5 per cent of the total fleet. Oversupply is expected to continue in the container shipping market this year, as the projected demand growth of 4.4 per cent will still be insufficient to absorb the revised supply growth of 5.5 per cent. Demand rose by 3.7 per cent in 2013 based on Alphaliner’s estimates of container throughput growth globally, compared to containership capacity supply growth of 5.7 per cent. Significant idle rates are expected to persist for the majority of the year, especially for vessels below 5,000 TEU. The weak outlook is forecast to keep the charter rates under pressure in 2014, with delivery date deferrals anticipated as non-vessel operating owners would be keen to hold up deliveries of some ships due this year.

“There are 80 ships for 302,000 TEU slated for delivery in 2014 to non-operating owners that are without known charter employment.” –

Item Number 5 – From InforMare (Feb. 20, 2014) – “Hanjin Shipping to scrap thirteen 5,300-4,000 TEUers on Indian beaches”

“South Korea’s Hanjin Shipping has sold 13 containerships – even 5,302 TEU and 4,024 TEUers built between 1996 and 1998 – for scrap on the breaker beaches of India. Most vessels were from the transpacific service, with the smaller ships deployed on Far East-US east coast strings via the Panama Canal while the overpanamaxes were deployed on Far East-US west coast services. It said the ships are currently being phased into Far East-India rotations, for final delivery to the scrap buyers. The first scrapped unit, the Hanjin Shanghai, arrived in Alang on January 31. It will be followed by the other axed ships over the next few months.

The vessels for disposal had been transferred four years ago to Korea Asset Management Company (KAMCO) under a government sponsored rescue package. KAMCO had taken these ships from the shipping line under a sale-and-lease-back deal in July 2009 to ease its short-term cash burden. The scheme was devised to prevent large chunks of its fleet from being sold to foreign buyers at distressed prices.

“Hanjin will take delivery of new 10,000 TEU ships chartered from Seaspan starting from March. They are expected to be deployed on its transpacific services to replace smaller vessels..” –

Item Number 6 – From InforMare (Feb. 20, 2014) – “Flood of panamax containerships head for the India’s breaker beaches.”

“As shipowners seek to renew their fleets with modern fuel-efficient vessels, US-based cash buyer GMS said more than 20 panamax containerships were being offered for scrap, with ‘more in the pipeline’. With the large number of containerships being touted for demolition, questions are being raised about the capacity of key markets in the Indian subcontinent to absorb so much tonnage over such a short period. Brokers reported at least six boxships sold over the past week, including some at rates edging close to the US $ 500 per ldt (light displacement tonne) mark. There was also talk of a seven-ship en bloc deal that, if confirmed, would represent a single scrap sale in terms of both tonnage and value, reports Lloyd’s List.

“‘A drip-fed supply of vessels would certainly be preferred to the tsunami that is currently enveloping – and some would say killing – the market,’ said Global Metals Solution (GMS) in its latest market report. ‘Several cash buyers that hold the inventory will now be competing among themselves to ensure that none of the vessels are sold cheaply, thereby devaluing their own particular purchases,’ the GMS report said. GMS said the yards in India and Bangladesh with capacity and available credit to take on vessels of this size were fast filling up. ‘Much of the January heat is therefore disappearing from the market, leaving a potential black hole for those cash buyers caught with an array of overpriced and oversized containerships,’ it added.

“Recent deals included Danaos’ 1991-built, 23,236 ldt, 4,814 TEU, 60,350 dwt Marathonas, which was reported sold for delivery to India at $ 495 per ldt, or just over $ 11.5 million. The rate was pushed up by the vessel’s superior Danish build, a 70-tonne bronze propeller and 250 tonnes of bunker fuel on board.

“Germany-based ER Schiffahrt was reported to have sold five containerships for delivery to India at $ 470 per ldt. Hanjin Shipping’s 1997-built, 18,989 ldt containership Hanjin Wilmington was reported sold for delivery to India at $ 460 per ldt or $ 8.7 million.

“‘Evidently, the market is being inundated with boxships, with the potential for further units,’ said London-based Clarkson Research Services. ‘However, price levels could come under pressure as a limited number of breakers have the financial capacity to acquire such a large volume of high ldt units at once.'” –

[This is a sure sign of an economic “recovery”. Right?]