BIMCO: Containership scrapping is at an all-time high

BIMCO’s chief shipping analyst Peter Sand says “the tools to turn the container shipping industry around are being used and are working.”    The Baltic and International Maritime Council (BIMCO) said containership demolition has reached an all-time high, as 500,000 TEUs have already been scrapped this year, 4.2 times more than the scrapping activity for the same months in 2015.
   “The demolition activity in the last three months surprised BIMCO positively and it exceeded our initial expectation based on the appalling 2015 demolition activity,” BIMCO Chief Shipping Analyst Peter Sand said. “The advance is a push in the right direction, as demolition activity is one of the essential measures needed to be taken to rebalance the container shipping industry.
   “It is important that the demolition of excess capacity comes sooner rather than later, as there is still a huge delivery schedule hanging over the container shipping industry for the rest of this year and well into 2017-2018,” Sand added. “However, the high demolition activity is currently softening the net supply growth rate of the container shipping capacity and will prevent a darker outlook for the years to come, if maintained.”
   Last month, the London-based shipping research and consulting firm Drewry said, “The fact that the orderbook is at a virtual standstill is a major positive as is rapidly increased scrapping. But even so, the next two years will still be very challenging on the supply side with annual fleet growth of between 5 percent and 6 percent and many more ultra large container vessels (ULCVs) to be delivered.”
   According to BIMCO, “With the last three months accounting for more than 41 percent of the total demolition in 2016, the activity is picking up and is primarily generated by the Panamax containerships.” BIMCO defines Panamax ships as those that have a capacity of more than 3,000 TEUs, but are able to fit through the old locks in the Panama Canal, even through some Panamax ships carry as many as 5,000 TEUs.
   With the opening of the new set of locks at the Panama canal, some Panamax ships are being “cascaded” into other trades that use smaller ships, while others are being scrapped.
   BIMCO said that the demolition of Panamax containerships, as measured by TEU capacity, accounts for 47 percent of the total demolition in 2016. Meanwhile, TEUs scrapped from intermediate containerships, those ranging from 3,000 TEUs to 7,999 TEUs, which are able to fit through the old locks at the Panama Canal, account for 30 percent, while smaller feeder containerships, which range from 100 TEUs to 2,999 TEUs, account for 23 percent.
   BIMCO noted that contracts for new containerships in the first eight months of 2016 tumbled 84 percent from the first eight months of 2015 as measured using “compensated gross tonnage,” which indicates the amount of work needed to build a particular sort of ship.
   “The events in 2016 have shown, that the tools to turn the container shipping industry around are being used and are working,” Sand said. “The recommendations to consolidate fleets and demolish ships are being taken seriously within the industry.”