A flow of newbuildings to the market has reduced the average age of the world’s merchant fleets, which means scrapping has less room than before to address oversupply, Danish Ship Finance (DSF), the Copenhagen-based shipping bank said.
“Across the segments (of ship types), the orderbook as a percentage of the operating fleet still amounts to just under 20%, which is somewhat high given the fact that recent years’ spate of deliveries has reduced the average age of the global fleet,” DSF said in a statement.
“Consequently, there are now fewer vessels left to scrap when rates are low. While some segments are currently experiencing decent rates, a generally low level of rates is expected to become the norm in the short and medium term,” DSF continued.
The bank reported a 1H15 net profit of DKK73 million (USD11 million), a reduction from DKK843 million in the same period last year. This was largely due to the fact that it booked DKK124 million in impairment charges in the latest half, whereas in 1H14 it had reversed DKK523 million worth of impairment charges booked earlier. Gross revenues rose slightly, to DKK1.02 billion from DKK1 billion.
The bank’s lending rose by DKK1.1 billion in 1H15 and its loan portfolio had a value of DKK44.3 billion at the end of June. “A small increase in lending is expected for 2H15 and the average loan portfolio margin to be more or less unchanged,” DSF said.