Owners should scrap more ships to take advantage of some very firm recycling prices coming out of South Asia at the moment.
“This rally has serious legs!,” broker Intermodal noted in its most recent weekly report. Scrap prices have firmed further in the past week, extending a solid rally seen since the start of the year.
Average prices for tankers were at around $270 to $350 per ldt while bulkers tended to garner somewhere between $260 and $330 per ldt.
Among the standout deals, Kenneth Koo’s TCC Group managed to offload the company’s oldest cape, CSK Grandeur, to Bangladeshi interests for $350 per ldt, giving the Hong Kong owner a tidy $7.5m.
German broker Zachariassen also tracked the scrapping of Asiatic Lloyd’s 4,500 teu boxship AL Encore, which recorded a very strong $351 per ldt.
Nevertheless, owners simply are not scrapping in the volumes seen during the first half last year with many analysts suggesting far more ships need to hit the beaches of South Asia this year to narrow the gap between supply and demand. Dry bulk owners might be swayed to hold off as the Baltic Dry Index crossed the 1,000 mark this week, while box owners have seen some freight rate improvements too in recent months.
As to whether the strong run on demo rates can continue, Intermodal alluded to the the fact that scrap steel prices in China have been also moving up in sync with demo prices, suggesting market fundamentals have been also strengthening, given that cheap Chinese steel exports were crippling prices in the past couple of years.