Large Losses in Mega-Ship Value
The container ship Hammonia Grenada has been scrapped for an estimated US$5.5 million after being purchased for a reported price of $60 million, a 90.8% difference, showing that carrier lines are willing to make large losses on the original cost of ships to condense fleets with larger vessels.
Container ships have been sold at rock-bottom prices for scrap in record numbers for the past year and a sharp increase in steel prices has now prompted a new wave of vessel scrapping to bring the supply-demand ratio in container shipping further into balance.
Over 2016 there were 189 demolitions (658,000 TEU), according to London shipbroker Braemar ACM – a new record for the container industry.
According to the latest report from Braemar, containership scrapping this year has already reached 56, amounting to 185,500 TEU. This compares with 16 ships (45,000 TEU) in the same period of 2016.
The delivery of newbuild tonnage totals 91,500 TEU and only 18 vessels so far for 2017 as there are too many ships for too little cargo.
The most dramatic casualty has been South Korean group Hanjin, which collapsed last August after mounting debts, leaving a fleet of vessels that will be scrapped or sold.
Ths exposed the frailty of container lines in an era of ultra-low freight rates and caused panic among cargo owners with assets aboard their ships.
Drewry explained that an immediate impact could be seen on the containership idle fleet, which surged after Hanjin’s demise when 98 ships with an aggregate capacity of around 610,000 TEU suddenly were left without employ.
The idle fleet went from 904,000 TEU in mid-August to 1.7 million TEU in mid-November.
Drewry stated: "With such a glut of containerships already available and limited demand growth it is debatable just how big a market they can attract even at knock-down prices.
"The biggest and youngest ships are likely to have the biggest pull."