Collapsing Oil Prices May Mean Less Ship Scrapping

by Ship & Bunker News Team
Thursday January 8, 2015

The collapse in oil prices, and corresponding decline in bunker prices, could see vessel owners scrap less vessels as they keep aging ships longer in order to take advantage of lower bunker prices, reports IHS Maritime 360.

"The disadvantage in fuel consumption that older ships incur becomes smaller when bunker prices drop," said Peter Sand, senior shipping analyst at BIMCO.

The fall in oil has also been credited for having narrowed the advantages of owning newer eco-ships versus their older, higher-fuel-consumption counterparts. 

"As fuel costs remain the biggest single cost item of seaborne transportation, in spite of falling prices, they can prove to extend the commercial life of certain parts of the older fleet," as long as the business is there for them," he said. 

Overall, "the more ships that stick around instead of being scrapped make the recovery slower than it would otherwise be."

The extra capacity has also been said to be contributing to the ongoing problem of excess tonnage in the market, which has dragged down freight rates for some segments such as container shipping.

For product tankers, more capacity may also crowd the market, even when looking at trades where oil majors are not dominant, according to Lars Christensen, executive vice-president of product tankers at D/S Norden. 

"Many owners look at the cash flow, not the balance sheet," he said. 

Elsewhere in the market, very large crude carrier (VLCC) rates have doubled because of collapsing oil prices as demand for floating storage grows. 

Ship & Bunker News Team
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