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Scrap activity remains subdued in 2024

Scrap activity remains subdued in 2024 mainly due to the combined impact of Russian sanctions and the Red Sea crisis. Another factor contributing to the decreased interest in scrapping, particularly within the tanker and gas sectors, is high demand for vintage vessels within the grey trade. These factors have increased shipping distances and driven freight rates upwards. During the first 7-month-period of 2024, a total of around 3 million DWT of bulk carriers and tankers were demolished, which is almost 14% down compared to the similar period of 2023. This indicates that shipowners are benefiting from the current market's high rates and profits, thus having no incentive to scrap older vessels. While the volume of scrapped vessels increased in Q1 2024 compared to Q4 2023, demolition activity in Q2 2024 reached its lowest quarterly level since Q2 2008. A total of 1.1 million DWT of Bulk Carriers and Tankers were demolished in Q2 2024, nearly 40% down the DWT scrapped in Q1 2024. More specifically, within the first 7-month period of 2024 around 0.6 million DWT of tankers and almost 2.3 million DWT of bulk carriers (examining the vessels >=10,000 DWT) were scrapped, while in Q2 of 2024 a mere of 0.11 million DWT of tankers and 0.99 million of bulkers were sold for demolition.

In the dry market, subdued recycling activity began in January 2021. Since then, monthly recycling has consistently remained below 1.5 million DWT, averaging 0.4 million DWT. From January 2021 to July 2024, a total of 17.3 million DWT of carrying capacity was demolished. In 2020, 15.3 million DWT were scrapped, which is only 12% less than the total scrap of 17.3 million DWT recorded over the subsequent 43-month period. On the other hand, the tanker market saw 13.6 million DWT scrapped in 2021, a year impacted by the Covid-19 pandemic, which suppressed oil demand and freight rates. However, from 2022 to the present, amidst the Russian invasion of Ukraine and the Red Sea crisis, only 6.2 million DWT have been demolished.

While bulker scrap values have remained relatively stable compared to the previous year, tanker scrap prices have declined by around 5%. The Indian subcontinent, encompassing India, Bangladesh, and Pakistan, is currently offering scrap prices 6-7% below the three-year average for both bulkers and tankers. Conversely, Turkey presents a more lucrative option, with scrap prices approximately 8% higher than the historical average.

The subdued recycling activity of the past years has resulted in the ageing of the bulk carrier and tanker fleet. Currently, the average age of the bulk carrier fleet is approximately 12 years. Within this fleet, 1,878 vessels are aged 20 years or older, representing a 16% increase compared to two years ago. The average age of the tanker fleet is currently 13 years, which is almost one year older than it was two years ago. Within this fleet, the number of vessels aged 20 years or older has increased by 70% compared to two years ago, reaching a total of 1,397 vessels. This aging of the tanker fleet, coupled with a similar trend in the bulker fleet, is primarily due to sustained high rates in both markets, leading to increased vessel utilization.

Sale and Purchase

Dry:

On the Kamsarmax sector, the “Rosco Poplar” - 82K/2008 Oshima was sold for USD 17.6 mills to Indian buyers. The Ultramax “Seacon Athens” - 63K/2019 Nantong Xiangyu announced sold for USD 32.1 mills to clients of Shenxin Ship Leasing. On the Supramax sector, the Scrubber fitted “Star Hydrus” - 57K/2013 Jiangsu Hantong found new owners for USD 16.6 mills. Finally, the OHBS Handysize “Efficiency OL”- 37K/2010 Saiki changed hands for low/mid USD 15 mills basis TC attached, while the one-year older OHBS “Vigor SW” - 32K/2009 Kanda Zosensho was sold for mid/high USD 13 mills to Asian buyers.

Wet:

Tanker S&P activity continues at a subdued pace. The Aframax “Salamander” - 115K/2004 Hyundai Samho found new owners for USD 27 mills. Turkish buyers acquired the Chemical tanker “Gall”- 28K/2018 Wuhu for USD 26 mills.

Xclusiv Shipbrokers Inc.