Could Containers Start Heading Towards the Ship Recycling Yards?

The container shipping market has been trending lower for quite some time now. So, could some vintage tonnage start heading towards the ship recycling yards of Southeast Asia? In its latest weekly report, shipbroker Clarkson Platou Hellas said that “there has been widespread chatter this week about container vessels possibly circulating into the recycling market, but it is still too early to get excited. Freight and time charter rates in this sector have indeed seen major softening, with the Shanghai Comprehensive Index (an indicator of spot container freight rates), down 62% from early 2022 and falling below 2,000 index points for the first time since November 2020. We have seen two container feeder types sold to date this year, both recent sales, however many potential candidates are likely still on charter employment from earlier in the year and freight/time charter rates, while significantly softening, remain above ‘pre-Covid’ 2019 levels (for now)”.

According to Clarkson Platou Hellas, “recycling is likely to pick up into 2023 as markets soften further, while the orderbook for containerships shows an enormous volume of tonnage to be added to the global fleet – this should then ensure more vintage container vessels will open for recycling. In the meantime, the lack of available candidates for recycling continues. There have been some small private sales taking place but certainly not sufficient to quench the thirst of the recyclers as they seek to fill the gaps in their yards. The annual Tradewinds Ship Recycling conference is on the horizon in Dubai (Tuesday 18th and Wednesday 19th October) although the usual ‘deals in the corner’ discussions will most likely not occur, given the current quiet climate”.

Meanwhile, in a separate note this week, GMS (www.gmsinc.net), the world’s leading cash buyer of ships said that “Sub-continent markets appear to have disappeared back into the ether for another week, as trading markets rebound and candidates for recycling start to dissipate. In recent weeks, volatile steel plate prices, a constantly deteriorating currency and starved U.S. Dollar credit lines across India, Pakistan and Bangladesh have all led to a near total halt on buying at anywhere near respectable levels. As such, it is hard to gauge where prices really stand today, with so few Buyers either having the capabilities to open an L/C & perform on any sizeable vessel, and furthermore, the lack of any sort of confidence to offer and maintain any firm levels. Even in Turkey, the situation remains unrelentingly gloomy, with little to no movement in any positive direction, all while local sentiments remain depressed on the back of a Lira that has been scraping to record-lows by the week and plate prices that remain in the dumps. Overall, it has been a frustrating period of time for Cash Buyers with any tonnage to sell and it is becoming increasingly fraught to get vessels delivered into a beleaguered recycling market. The rebound on VLCCs has also just come at the right time, and to see Suezmax and Aframax tankers flying and even a rebound on Cape rates of late has seen most larger LDT vessels bypass the beaches once again as they have yet another chance at squeezing out a few more voyages. There are also very few small(er) LDT vessels on the buffet and as such, it increasingly looks as though it will be as quiet an end to the year as it has been for the last two quarters. Certainly, it is time again for the recycling markets to get their affairs in order, ahead of an anticipated higher influx of vessels next year”, GMS concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide