Bulker demolitions are poised to dwindle amid a “perfect storm” of cheap steel, improved freight rates, and monsoon weather, says Khalid Hashim, managing director of Thailand-based dry-bulker Precious Shipping.
Hashim told IHS Maritime that scrapping, which has benefited the Cape sector in particular, now faces “head winds”.
First, Chinese steel exports are at record volumes, shipping worldwide at low prices in strong competition with steel from rolling mills that buy ship scrap.
“As a result, appetite for scrap ships has fallen and with it prices for scrap ships have fallen from just below USD400 per ton steel weight to just above USD300,” he said.
Second, freight rates have risen, adding to the “deterrent” against scrapping.
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Third, the monsoon season in South Asia, where much of the breaking up is done, is likely to bring a lull in activity, he said.
“These have combined to create the perfect storm in the scrapping tea cup and in the [second half] of 2015 I expect scrapping to be very tame compared to the [first half] numbers,” said Hashim.
Dry bulk scrapping surged in the first half of 2015, when about 20 million dwt were taken out of the market.
Most of the scrapped ships were Capesizes, which boosted the rates in that sector and also ensured overall marginal supply growth.