Online valuation and market intelligence provider VesselsValue says that 2021 saw significant trends and changes in the shipping industry that combined to result in a diverse demolition market.
Last year saw 704 vessels sold for scrap overall, with a combined DWT of 26.4 million and a total scrap value of $2.7 billion.
Tankers dominated the demolition market in 2021 with 301 vessels sold for scrap, accounting for 59% of all cargo vessels demolished.
The comparatively low number of bulkers scrapped last year, at 59 vessels, comprised 11% of the scrapped fleet, whereas the 11 container vessels sold for demolition made up only 2%.
The surge in tanker scrapping represents a 242% increase from 2020, when just 88 tanker demolition deals were closed.
“Static spot and TC rates have led to shipowners sending a large amount of older tonnage to the scrapyard, with many perhaps running out of patience awaiting a tanker recovery,” says VesselsValue’s Joey Daley.
BOX SHIP DEMOLITIONS PLUMMET
Bulker demolition sales were down from 132 vessels in 2021, a decrease of 55% due to the 10-year highs seen previously in the charter market throughout 2021, which saw owners capitalizing on the unprecedented rates. However, the most impressive decline in scrapping numbers came from the container market, which saw an 87% reduction in scrapped vessels, from 83 vessels in 2020 to 11 in 2021.
“With rates during 2021 at historic highs, the low scrapping numbers for this vessel type are hardly surprising,” says Daley.
Firm LPG charter rates meant for a fairly inactive year for demolition, with shipowners opting to get rid of older, smaller vessels. However, despite rates increasing since 2021, scrapping numbers still grew in 2021, up two from the 16 scrapped in 2020, potentially due to a fleet renewal as the LPG orderbook continues to increase.
Despite LNG scrapping numbers growing by 25% since 2020, when compared to other vessel types the number of LNG carriers being scrapped is relatively small comprising only 1.3% of cargo demolition.
“This is due in part to a young fleet; the average age of live LNG carriers is 10 years old,” says Daley. “However, it could also reflect the market’s confidence in the sector, likely fueled by a rapid growth in the price of LNG throughout 2021, with charter rates following suit. Talk of LNG as an important ‘transitional fuel’ has also no doubt contributed to the year’s low LNG scrapping numbers.”
“Although the steel price could be heading for a correction in 2022, continued low tanker rates and a declining bulker market could spell an active year for demolition in these sectors,” says Daley. “Conversely, the container and gas markets look to stay strong, and it may not be until 2023 that a real increase in container and gas scrapping is observed.”