The low market value of older Capesize vessels may prompt a steeper than expected recovery in the dry bulk sector, according to shipping analysts.
The gap between the second-hand and scrap value of a 15-year-old Capesize bulker has narrowed to a mere USD2.4 million, the analysts noted.
“As scrap prices have firmed up, the spread between a 15-year-old Capesize and scrap is now merely USD2.4 million – the market clearly communicating a strict age restriction,” said Kurt Waldeland and Erik Nikolai Stavseth, shipping analysts at Arctic in Oslo.
Taking a Capesize vessel of this age through special survey and dry docking is a cost element that has increased owners’ willingness to scrap older vessels rather than to face the expense.
“Although the demand picture has softened and underperformed most expectations, we argue that continued scrapping will be a factor that can provide a balance and effectively position dry bulk for a steeper recovery into 2016,” the analysts said in a daily market report.
“We also see this factor as potentially being a driver for a recovery in rather abysmal FFA rates. 2016/17 FFAs are up 20% over the past week from a trough of USD8,400/day to USD10,000/day (Capesize 2016FFA),” the two analysts concluded.