Ship owners urged to scrap older vessels as recycling prices sink to new low
Demolition prices for older ships have fallen by a quarter in 2012, signalling a “historical drop”, according to shipping brokerage Braemar Seascope.
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However, speaking at the 7th Annual Ship Recycling Conference in London on June 19-20, Braemar’s research director Mark Williams urged ship owners to scrap elderly vessels immediately and claim their “end of life bonus”, as freight markets would remain weak for at least the next two years.
“Prices [for any type of recycled ship] peaked at about $510 early in January 2012 and offers were down to $400 by the end of May,” said Williams, assessing the updated Baltic Exchange Demolition Assessment figures (until June 25).
Baltic Exchange average prices are taken as a benchmark price for the industry.
These figures listed three different types of ships sold for recycling in the Indian subcontinent – dirty tankers, clean tankers and bulk carriers.
On January 3, 2012, the average price for all three categories (per light displacement tonne), as analysed by Williams, stood at $477.33, and on June 25 the average price fell to $394.17.
This fall has not been steady though, as the price rallied at the end of January to $504.83, he added.
Williams said the unprecedented drop in recycling prices had been triggered by a weak freight market, a period of deflation in commodities, a strong steel market, ample supplies of ships for recycling and the credit crunches suffered by India, Pakistan and Bangladesh with their currencies weakening against the dollar.