October 12 ------ Sales of tankers for demolition reached a 39-month high during September. Yet, with the sector notorious for holding on to tonnage and oil prices on the rise, the long-expected rebalancing of supply and demand among the tanker operators appears still to be delayed.
Industry trade group BIMCO reports that a total of 1.9 million dwt of capacity was removed in September from the tanker sector. This compares with sales of just a total of 2.2 million dwt of capacity scrapped in the prior eight months of 2021. “The increasing number of VLCCs being demolished is the main driver behind this 39-months high,” says Peter Sand, BIMCO’s Chief Shipping Analyst. “Still, in addition to the four 25-year-old VLCCs, we had one Suezmax, four Aframaxes removed from the actively trading fleet in September adding to the much-needed rebalancing of the supply and demand balance of the market.”
For the month of September, BIMCO reports that a total of 15 crude oil tankers were sold for scrap. This included the demolition of three oil product tankers, two small Handymax bulkers. Yet while the scrap mark has been strong due to increasing steel prices, BIMCO also notes that no containerships were sold to the breakers. For 2021 as a whole, just 15 containerships have been demolished, with an average age of 28 years. According to BIMCO, it is a testament to a spectacularly profitable container freight market in sharp contrast to the rates crude oil tankers have been receiving in the spot market. “Spot market freight rates for all sizes of crude oil tanker are still loss-making as we head into the early winter market, which often brings about positive surprises to the spot market freight rates, while denting the demolition interest at the same time,” Sand says.
In addition to a slight rise in spot rates for crude tankers in recent days, BIMCO also notes that September did not have any sudden change in events that could prompt October to see high crude oil tanker demolitions. Sand concludes that the removal of three high steel content supertankers bringing in $27.4 million per ship to its owners, may have been a one-off event in the market. With the expectation that there might be a slightly positive movement in the sector, the prediction is that tanker owners are likely to continue to hold on to tonnage. Beyond the occasional, opportunistic sales the expectation is that demolitions of tankers will remain at low levels despite depressed spot rates.