London: Demolitions of dry cargo vessels have increased again this month, and the average age of bulkers being scrapped has fallen, data from VesselsValue.com shows.
This year, so far 4.45m dwt in dry bulk tonnage has been scrapped – equivalent to more than 1% of the global fleet – compared with 2.39m dwt in the first two months of 2014.
Thirty bulk carriers have been demolished so far this month plus 32 in January, with average ages of 25 years and 25.3 years respectively.
In contrast, only 17 bulkers were scrapped in February 2014 and 23 in January that year, the VV data shows, with respective average ages of 29.2 years and 30.9 years.
This uptick in demolitions is down to continually weak freight rates caused by vessel oversupply. Today, the BDI fell one point on Friday’s level to 512 points. The index has fallen for 56 days of the last 58, and is now 68% lower than last year’s high of 1,621 points, seen in March 2014.
“Scrapping of dry-bulk vessels is picking up significantly and fewer owners are likely to order new vessels from ship yards, hence fleet growth is likely to slow significantly in coming years,” analysts at RS Platou Markets said in a report today.
“This should result in improvements but the pace of recovery could take a while and in the meantime weak cash flows represent a material risk for companies with many vessels on the water and unfunded newbuilds on order.”
Last week, Angeliki Frangou, chairman and CEO of Navios Maritime Holdings, predicted that the market could begin to see bulkers being laid up, as well as delayed deliveries and fewer newbuild orders.