HSBC Weekly 081110
분류없음 2008/11/10 10:05
Points of View
You have probably read to satiety about the US Presidential elections, so now
for something completely different: a load of rubbish?
Due to a lack of credit and a fall in demand for scrap steel, demolition prices for
ships have fallen from over $750 per LDT in 3Q08 to around $180 - $230 per
LDT today. Pakistani buyers have shut up shop for now as the local economy is
in intensive care, waiting for Doctor IMF to arrive. Indian buyers are said to be
renegotiating prices as ships arrive. Chinese buyers have re-entered the market
at low prices but it remains to be seen how much appetite they have for ship
recycling, as China is over-producing steel by a considerable margin. According
to metals consultancy CRU, global average scrap steel prices have tumbled
from a peak of $481 per ton in July this year to just $230 per ton in October.
Meanwhile a great many older ships are due for demolition in the coming years:
- The single-hull tanker phase out will retire up to 70m-dwt of ships by 2015 -
about one fifth of the current fleet at the end of October 08. Up to 12m-dwt in
2008 and 9m-dwt in 2009 of oil tankers had been proposed for conversion to
bulk carriers or FSO / FPSO units. Now that the dry bulk freight markets have
collapsed and lower oil prices are discouraging storage / FPSO projects, those
tankers earmarked for conversion may face demolition instead.
- Some 26m-dwt of Capesize bulkers are currently 20 years old or more. Add
25.5m-dwt of Panamax, 17.5m-dwt of Handymax and 48m-dwt of Handysize
bulkers and about 29% of the current bulk carrier fleet is coming up to
conventional scrapping age. The dry bulk orderbook nominally outnumbers
these overage ships by a ratio of 2.5 to 1. Even if a swathe of bulker
newbuilding contracts is torn up due to the market crash and credit crunch,
newbuildings probably still outnumber elderly ships by two to one, creating
pressure to take old, unprofitable ships out of service as their next dry dock
comes due. Owners are expected to lay-up what they can, but we predict a
significant rise in scrapping in line with previous market cycles.
- The containership fleet is currently approx 11.8m-teu with 6.3m-teu on order.
Only a very small percentage of the fleet is more than 20 years old but the
terrible economics of container shipping due to the global recession may force
younger ships into scrap yards as newbuildings are going straight into lay-up
(c.f. tanker markets in 1975). Technological advances in container shipping
have been so fast that even ships that are 15 years old may be too
uneconomical to run anywhere except up the beach.
Back-of-the-envelope calculations suggest that around 200m-dwt of
mainstream commercial vessels may be scrapped over the next five years, not
counting more specialised types such as chemical tankers, gas carriers,
passenger vessels, fishing fleets, inshore and brown water vessels and
government-owned / military vessels. In 1999, following the Asian currency
crisis, upwards of 30m-dwt of commercial ships were scrapped. But even
though Alang beach is miles long, there are moves afoot to prevent on-beach
decommissioning. The IMO is working on rules for ‘cleaner’ ship breaking (a
memo was published last month) which could radically alter the economics of
ship breaking for the future.
Oil rig operators accept that they must pay for decommissioning. Our sources
estimate that the cost of decommissioning 800+ active North Sea structures will
run to as much as $20 billion. Under a new regime, ship owners may find that
the end-of-life bonus cash payment to which they have been accustomed
evaporates, to be replaced by a bill for decommissioning. Implementing and
enforcing such a scheme would be tortuous and it sounds improbable right
now, but so did legislation against single-hull tankers, against sulphur content
in fuel, against ballast tank flushing and many other technical regulations
before they took effect. We have been warned.
You have probably read to satiety about the US Presidential elections, so now
for something completely different: a load of rubbish?
Due to a lack of credit and a fall in demand for scrap steel, demolition prices for
ships have fallen from over $750 per LDT in 3Q08 to around $180 - $230 per
LDT today. Pakistani buyers have shut up shop for now as the local economy is
in intensive care, waiting for Doctor IMF to arrive. Indian buyers are said to be
renegotiating prices as ships arrive. Chinese buyers have re-entered the market
at low prices but it remains to be seen how much appetite they have for ship
recycling, as China is over-producing steel by a considerable margin. According
to metals consultancy CRU, global average scrap steel prices have tumbled
from a peak of $481 per ton in July this year to just $230 per ton in October.
Meanwhile a great many older ships are due for demolition in the coming years:
- The single-hull tanker phase out will retire up to 70m-dwt of ships by 2015 -
about one fifth of the current fleet at the end of October 08. Up to 12m-dwt in
2008 and 9m-dwt in 2009 of oil tankers had been proposed for conversion to
bulk carriers or FSO / FPSO units. Now that the dry bulk freight markets have
collapsed and lower oil prices are discouraging storage / FPSO projects, those
tankers earmarked for conversion may face demolition instead.
- Some 26m-dwt of Capesize bulkers are currently 20 years old or more. Add
25.5m-dwt of Panamax, 17.5m-dwt of Handymax and 48m-dwt of Handysize
bulkers and about 29% of the current bulk carrier fleet is coming up to
conventional scrapping age. The dry bulk orderbook nominally outnumbers
these overage ships by a ratio of 2.5 to 1. Even if a swathe of bulker
newbuilding contracts is torn up due to the market crash and credit crunch,
newbuildings probably still outnumber elderly ships by two to one, creating
pressure to take old, unprofitable ships out of service as their next dry dock
comes due. Owners are expected to lay-up what they can, but we predict a
significant rise in scrapping in line with previous market cycles.
- The containership fleet is currently approx 11.8m-teu with 6.3m-teu on order.
Only a very small percentage of the fleet is more than 20 years old but the
terrible economics of container shipping due to the global recession may force
younger ships into scrap yards as newbuildings are going straight into lay-up
(c.f. tanker markets in 1975). Technological advances in container shipping
have been so fast that even ships that are 15 years old may be too
uneconomical to run anywhere except up the beach.
Back-of-the-envelope calculations suggest that around 200m-dwt of
mainstream commercial vessels may be scrapped over the next five years, not
counting more specialised types such as chemical tankers, gas carriers,
passenger vessels, fishing fleets, inshore and brown water vessels and
government-owned / military vessels. In 1999, following the Asian currency
crisis, upwards of 30m-dwt of commercial ships were scrapped. But even
though Alang beach is miles long, there are moves afoot to prevent on-beach
decommissioning. The IMO is working on rules for ‘cleaner’ ship breaking (a
memo was published last month) which could radically alter the economics of
ship breaking for the future.
Oil rig operators accept that they must pay for decommissioning. Our sources
estimate that the cost of decommissioning 800+ active North Sea structures will
run to as much as $20 billion. Under a new regime, ship owners may find that
the end-of-life bonus cash payment to which they have been accustomed
evaporates, to be replaced by a bill for decommissioning. Implementing and
enforcing such a scheme would be tortuous and it sounds improbable right
now, but so did legislation against single-hull tankers, against sulphur content
in fuel, against ballast tank flushing and many other technical regulations
before they took effect. We have been warned.
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