Declining prices have made 2014 a very hectic year for the demolition market as less DWT and fewer TEUs were scrapped compared to previous years, according to the Baltic and International Maritime Council (BIMCO).
Starting with containership market, initial estimates for 2014 were set relatively low at 250,000 TEU thinking the market might have peaked. The year, however, started at great speed and after only six months, the full year estimate was already met. Almost 75% of the total 387,000 TEU scrapped in 2014 was done in the first six months of the year, BIMCO said. But as prices dropped, scrapping halted in the second half of the year.
India, China, Pakistan and Bangladesh accounted for 91% of all ship breaking in 2014
In 2014 almost 16 million DWT of dry bulk carriers were scrapped representing another steep decrease for the segment. 16 million DWT is less than half of the 33 million DWT scrapped in 2012 where the demolition was at its highest for this segment, the Council pointed out.
BIMCO further added that the demolition of crude oil tankers and oil product tankers has been relatively stable in recent years with 7.5-9 million DWT scrapped each year for crude oil tankers and between 1.5-3 for oil product tankers. The tanker segment also experienced a slight decline in 2014 as 6.6 million DWT worth of crude oil tankers were scrapped, whereas the amount of oil product tankers was just under 1.5 million DWT.
“The big four” in the ship demolition business: India, China, Pakistan and Bangladesh accounted for 91% of all ship breaking in 2014 with India marginally larger than the other three.
“For three of the scrap consuming nations an old foe presented itself in 2014, in the form of cheap steel billets from China. The low iron ore prices and the fact that China’s extraordinary domestic growth has started to slow down, leaves them with extra steel for export markets. Most of these steel billets are going to India and the demolition market is feeling the effects, ” the association adds.
When 2014 entered into its second half scrapping prices were around USD 500 per LDT. At year-end prices had dropped into the low 400s.
“For the first weeks of 2015 the prices have continue to drop, currently placed in the high 300s. Both India and Pakistan have announced their intent to pose a tax on imported steel billets, but so far nothing has been implemented, “BIMCO said.