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BIMCO: Box ship demolition at all time high

Written by Nick Blenkey
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NOVEMBER 7, 2016 —Containership demolition is at an all time high —creating what BIMCO calls “a positive surprise for the struggling container shipping industry. “

“The demolition activity in the last three months’ surprised BIMCO positively and it exceeded our initial expectation based on the appalling 2015 demolition activity,” says BIMCO’s Chief shipping analyst Peter Sand. “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. 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.”

So far containerships totaling 500,000 TEU in capacity have been scrapped, this is 4.2 times more TEU than the scrapping activity for the same months in 2015

With the last three months accounting for more than 41 % of the total demolition in 2016, activity is picking up and is primarily generated by the Panamax containerships. The demolition of Panamax containerships in TEU accounts for 47 % of the total demolition in 2016, while TEU scrapped from Intermediate and feeder containerships account for 30% and 23% respectively. The demolition of Intermediate containerships has had a great return from only being scrapped one month in 2015.

The demolition of Intermediate containership is a strong signal, for the measures taken in the container shipping industry, as they generally are bigger and younger than the Panamax and Feeder containerships.

The high level of scrapping comes follows BIMCO reporting the lowest level of newbuilding contracts in 20 years. Container contracts, based on CGT, were down 84% for the first eight months of 2016 compared to the same period in 2015.

“The events in 2016 have shown, that the tools to turn the container shipping industry around are being used and are working,” says Peter Sand. “The recommendations to consolidate fleets and demolish ships are being taken serious within the industry.”

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