Is the sale of a 14-year old Post-Panamax Containership for Scrap a New Trend?

Is the sale of a 14-year old Post-Panamax Containership for Scrap a New Trend?

Craig Jallal, Senior Data Editor of mapping, ship search and valuation service VesselsValue, examines if the sale of a 14-year old Containership is the start of a new trend. To set the sale in context, the average age of all sizes of Containerships sold for scrap in 2014 and 2015, was around 22-years old. There have been relatively few Post-Panamax Containership sold for scrap, but the average age at the time of sale was around 19.5-years old. Therefore, the 2002-built, 5,447-teu Post-Panamax Containership Conti Taipei was sold relatively young, but this does not appear to be a one-off event. There have been three other 2002-built Post-Panamax Containerships sold in the last six months. All three were built at “quality” shipyards in South Korea, and at the time of sale their next Special Surveys were not due for at least twelve months or more.

Other distinguishing features were that all three vessels were owned by German companies, and had been inactive at least six to three months before the sale, according to the VesselsValue’s vessel tracking module VV@. Using the ship search VV+ module, it is possible to filter the Post-Panamax Containership fleet for similar ships i.e., built between 1999 and 2003, owned by a German company, and with Special Survey due before 1 May 2017. The VV+ search returns 17 candidate ships from a potential fleet of over 1,000 Post-Panamax Containerships.

Two of the 17 vessels on the candidate list have been in-active for at least eight months. These two ships are currently stationed among a group of islands close to the city of Zhoushan (near Shanghai) in China. These are sisters-ships, and are currently valued at USD 17m each, with a demolition value of around USD 8m. One of the above islands, Daixizhen Island, has also recently become the host to two more Post-Panamax Containerships. These are also sister-ships, with a current value of USD 16m, and a demolition value of USD 7m.

Now that the scrap price is firmer, it will be interesting to see if these relatively young Post-Panamax Containers ships are sold for scrap, too.

Capesize Scrapping Candidates

Is there a pattern to the Capesize recently sold for recycling and can we use this to predict the likely candidates?

While researching the sales of Capesize sold for scrap for an earlier blog, I noticed there was a pattern to some of the sales, and it was not just age related. Certain ship specifications and yard of build feature more often than others. Of course, the most prolific shipyards are bound to rank high in the lists, as they built the most ships. But as a percentage of sales for scrap to ships built, certain yards stand out. Scrapping sales in the last 18 months have been driven by weak freight rates, high fuel costs, a chunky delivery schedule and the incentive of a high scrap price. For owners of “rarer” Capesize another reason may be the difficulty in finding spare parts for ships built in yards no longer operational.

Going through the Capesize sales for recycling one-by-one over the last 18 months leads me to believe that Capesize from the yards in the table are scrap candidates within the next 12 months, if not sooner. Most are European yards with only a handful of ships remaining in the fleet. Taiwanese shipyard CSBC was a prolific builder of 149,999 dwt Capesize, and these now feature a lot in the sales lists. The small capacity no longer finds favour, and I think these pre- 1996 ships (after that the series changed to 161,000 dwt) are strong scrap sales candidates. In the cases of Hitachi Zosen and Sumitomo H.I., not all ships built in those yards are included as candidates, only the ones similar in specifications to the known sales. Altogether the number of yard-related candidates amounts to about 4% of the current fleet.

The second group is the tanker conversions. In the last 18 months, ten tanker conversions to Capesize have been sold for scrap, which is around 9% of those known to have been converted. Another 78 conversions of just less than 2.0m dwt in total (approximately 8% of the current fleet) remain in service. The youngest is 16-years old and the oldest 23-years old. Most, if not all these were sold for conversion to take advantage of the high freight rates pre-2008 when there was a shortage of newbuilding slots and an excess of high-powered single-hull tanker tonnage available. But by the time they entered the fleet the boom had passed. Rebuilding a VLCC to VLOC configuration included fitting new tank tops and hold walls to take the impact of loading high density iron ore cargoes and strengthening the deck for the hatch openings. Ironically this was virtually making the old VLCC double-hull; although it would be too expensive to re-convert a tanker back to Marpol 13G compliant tanker specifications.

Owners will argue these are virtually new ships, but in a poor freight market with a plentiful supply of newer tonnage these will be the last choice of charterers. Some of these “new” VLOCs have been scrapped within five years of conversion. This suggest to me that it is not just the freight market, but underlying operational issues that are seeing these vessels sold for scrap as the surveys approach. Therefore I think all these conversions are scrap candidates ahead of Capesize and VLOCs of similar original vintage. These two patterns of Capesize sale, by yard and conversion, point to a total of around 12% of the current Capesize fleet being scrap candidates before age is taken into account.

Copyright Craig Jallal. All Rights Reserved.

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