Baltic Dry Index Starts Week on a Positive Note as Dry Bulk Scrapping Escalates

While most of the vessels being scrapped are said to be 20 years or older, a number of young ships are also being sent for demolition.

The Baltic Dry Index (BDI) started the week on a positive note gaining 3 points to reach 398 Monday as dry bulk scrapping is reported to have sped up over the past two months.

Average TC spot rates in the Supramax segment were up $108 to earnings of $4,807 per day Monday, while both Capesize and Panamax were down to $2,031 (-$5) and $3,678 per day (-$38), respectively.

Meanwhile a report by IHS Fairplay Monday indicated that for January and February 107 bulkers were scrapped, amounting to 7.75 million dwt.

This compared to 81 bulkers, or 4.9 million DWT, during the same period of 2015.

While most of the vessels being scrapped are said to be 20 years or older, a number of younger ships are also being sent for demolition, including three Panamax bulkers and one Capesize - owned across China Shipping Group, Sinotrans, and Mitsui OSK Lines (MOL) - all built in 2000.

As Ship & Bunker reported last month, ships as young as three years old are now being considered for scrap.

While it has been widely reported that the dire markets have pushed down vessel values, Global Marketing Systems (GMS), who says it is "the world's largest cash buyer of ships for recycling," says that the uptick in scrapping has also pushed down scrap values.

Bulkers are being reported as being sold at prices of $250 to $255 per per light displacement tonnage (LDT) in South Asia, compared against prices of more than $400 per LDT three years ago.

Erik Nikolai Stavseth, shipping analysts at Oslo-based Arctic Securities AS (Arctic), is said to estimate that about 60 million DWT in bulkers could now be scrapped within 2016, up from Stavseth's previously reported estimate of 50 million DWT in February.

In February, Peter Sand, chief shipping analyst at BIMCO, said "the extensive demolition activity within the dry bulk shipping industry is expected to continue to climb through 2016."