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.

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