January Sees Huge Spike in Dry Bulk Scrapping

Dry bulker demolition sales are reported to have reached 4.6 million DWT in January, a year on year increase of 84 percent.

Peter Sand, chief shipping analyst at BIMCO, says dry bulker demolition sales reached 4.6 million DWT during January, which represents an 84 percent increase from 2015's monthly average sales of 2.6 million DWT.

"The extensive demolition activity within the dry bulk shipping industry is expected to continue to climb through 2016," said Sand, noting the increase in scrapping rates is a welcome development for a sector plagued with overcapacity and low demand.

In terms of individual vessel numbers, Greece-based shipbroker Golden Destiny says that 53 dry bulk vessels were recycled during the first month of 2016, marking a 20 percent increase from the previous month and a 43 percent increase from January of 2015.

With only three tankers and seven container ships demolished during the period, Golden Destiny further notes that dry bulk carriers accounted for 70 percent of all ships scrapped in January 2016.

The demolition of dry bulk ships in 2015 is noted by Sand to have been the highest within the Capesize segment with a total of 15.5 million DWT of Capesize tonnage demolished during the year - a little over half of the total 30 million DWT of all dry bulk demos.

During January, 23 of the dry bulk vessels demolished are said to have been Panamaxes at an average of 72,186 DWT, 11 were very large ore carriers (VLOC) averaging 164,039 DWT, and nine were Handymaxes averaging 44,224 DWT.

"Although a stronger permanent growth on the demand side would provide the biggest relief, this seems unlikely in the near future," said Sand.

"Alternatively, increased scrapping could be a way to improve the fundamental imbalance between supply and demand in the dry bulk shipping market."

But the number of ships required to be taken out of service in order to make a different could be significant, with Allied Shipbroking last month saying it believes 1,430, or almost 15 percent of the current fleet, need to be laid up in order to restore balance.

As Ship & Bunker reported Friday, the Baltic Dry Index (BDI)'s historic decline so far in 2016 finally came to end at the end of last week, rising 1 point to 291, representing the index's first positive movement so far in the 2016 year.