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This increase is mainly attributed to global steel price that has increased by more than 10% YTD amid limited supply, while most analysts speak about an upcoming significant increase in demand as the construction and infrastructure sectors pick up. Meanwhile steel production in China is constrained for the first quarter of 2022 due to factories maintenance and efforts by the government to limit CO2 emissions and pollution. Apparently, the goal for carbon neutrality in 2050 will significantly affect steel production. As Euronav calculated, steel produced from scrap requires less energy than steel produced from iron ore, which translates to up to 70% reduced emissions. This indicates that firm demand for steel in compliance with environmental concerns makes the possibility of a continuous and ongoing need for scrap to be high, increasing the need for vessel demolition.

Going back to the dry & wet sectors, scrap offered prices have kept increasing, keeping well above the $600/ton mark, while YTD in Bangladesh prices have risen by USD 45/ldt, while in India & Pakistan by USD 30/ldt. Meanwhile in Turkey there has been a slight increase of around USD 10/ldt keeping offering price above USD 330/tn. During 2021, in the tanker sector (over 25k in dwt), there was a better balance in ships demolished vs ships delivered, as 137 ships were beached, while 202 new ships entered the market adding around 1.6% to the fleet growth in DWT terms. During 2021, on the drybulk market (over 20k in dwt), we recorded only 53 vessels that were demolished, while 366 new vessels joined the dry bulk active fleet, leading to a 3.3% fleet growth in DWT. High demo price, together with the prolonged low tanker rates, and the past months downward trend of dry bulk rates coupled with the EEXI compliance that will soon be in force, may tempt owners of less efficient overaged ships with DD due to scrap more.
At date of publishing, Brent crude oil prices climbed to over USD 93/bbl, hitting a new 7-year high before landing back to USD 91/bbl & WTI crude futures held steady around USD 92/bbl, riding on the bullish momentum from the past weeks on expectations that global supply remains tight as demand will continue to recover. Meanwhile the restoration of sanctions waivers from U.S. to Iran to allow international nuclear cooperation projects, as the talks on the 2015 international nuclear deal enter their final stretch, erupted the rumours for a sanctions’ lift on Iran, so the country could boost oil shipments, adding to global supply. If this happens will not only - according to traders - be a reason for the oil price rally to be steamed out, but according to market analysts, will also lead a significant number of very old VLCCs, which are transferring Iranian oil, to the scrap yards. The VLCC market is the most over-tonnaged crude tanker segment, having a net DWT growth of about 2.1% in 2021, while the fleet has expanded by around 7.7% since the pandemic hit. An increase of ships going to scrap as a result of lifting Iranian sanctions will be more than welcome by the shipping industry as it will lead the VLCC market to a better balance.
On the Russian/Ukrainian conflict, the tension between U.S. and Russia still escalates. Asian countries don’t worry about Russia facing sanction possibilities as Russian oil makes up only a small portion of many Asian countries' refinery feedstock import baskets, with many possible alternatives available. Thailand is Asia’s biggest importer of Russian crude oil, making up around 3.7% of its overall refinery feedstock imports in the year, South Korea imports from Russia in 2021, are equivalent to 5.6% of its overall crude imports while Japan’s Russian crude oil imports, equate to 3.6% of its total crude imports. In the event that purchasing Russian cargoes become complicated due to all sorts of legal and diplomatic reasons for these countries, they will mainly resolve to Alaskan North Slope crude and light sweet Malaysian grades according to traders. China, Russia’s second biggest imported after EU, will continue to absorb large volumes from Russia despite any possible sanctions due to the very close trade and economic partnership between Beijing and Moscow.
Sale and Purchase:
On the drybulk S&P, the Scrubber fitted Newcastlemax “Hemingway” - 208K/2017 SWS built was sold for USD 52 mills to clients of JP Morgan. Clients of Circle Harmony Shipping acquired the BWTS fitted & TIER II Kamsarmax “Spetses Spirit” - 80K/2011 STX for low USD 20 mills. On the Supramax sector, the BWTS fitted “Magda” - 58K/2010 Dayang was sold for USD 16.7 mills to clients of Costamare.
On the tanker side, clients of Sinokor acquired the VLCC “Athenian Success”- 299K/2010 HHI for USD 42.5 mills. Furthermore, 2x Aframaxes found new owners, mainly, the “Glifa”-109K/2005 Hudong Zhonghua sold for USD 14.7 mills to clients of Soechi, while the 2-year older “Gundala”- 107K/2003 Imabari changed hands for USD 11.7 mills. Finally, 3x Chemical tankers IMO II compliant & CPP, the “Team Osprey”- 25K/2009 Dae Sun, the “Team Hawk” - 25K/2008 Dae Sun & the “Team Falcon”- 25K/2009 Dae Sun committed at USD 9 mills each to European buyers.
Noteworthy is the sale of the VLCC “New Inspiration”- 298K/2002 Hitachi (40,737 LDT) which was sold for demo in the region of USD 660/ LDT which equates to high USD 26 mills basis delivery Gadani.