60 percent of owners surveyed by UBS say they expect to scrap their older vessels on new regs.
A new report by global banking firm UBS Limited (UBS) suggests that new regulations on shipping, including ballast water management (BWM) rules and tightening restrictions on sulfur emissions, will lead to increased rates of scrapping for vessels, particularly among those vessels of 15 years of age and older.
Overall, 60 percent of owners surveyed for the UBS report say they expect to scrap their older vessels in response to new regulations.
While scrapping of vessels below 15 years of age is noted to be "highly unlikely," 30-40 percent of owners who responded to the UBS survey said they would scrap vessels between the ages of 15-20 years old, while the remaining scrapping is likely to take place among vessels above the age of 20.
The elevated scrapping should result in tighter supply-demand dynamics
"We believe shipowners with younger vessels win here. The elevated scrapping should result in tighter supply-demand dynamics," stated the report.
Among the effects of the new and tightening regulations, UBS says capital spending could also increase to retrofit vessels, demand for lower sulfur diesel fuel may increase "significantly," new vessel orders are likely to cost more as a result of increased equipment requirements, and owner behaviour, including vessel operating speeds, may change.
UBS' report also echoes the conclusion Drewry Shipping Consultants Limited (Drewry) drew in November, when the consultancy suggested that tanker demolitions, spurred on by weak freight rates, will accelerate in coming years as a result of BWM regulations.