Capesize and VLOC (Very Large Ore Carrier) scrapping in the first three months of 2019 is more than 2018’s total. A surge in demolition activity is partly due to low freight rates and high demolition prices. Vale Brazil dam disaster has helped drive capesize freight rates to three-year lows and below operating expenses, while high demolition prices have also increased scrapping. In the first three months of 2019, 16 Capesize and VLOC (Very Large Ore Carrier) sold for scrapping.
In 2018, big size ship demolition was almost non-existent due to freight rates, despite the slump in the capesize market at the end of Q3 and the lacklustre Q4 2018. Capesize market started very slowly in 2019. Afterwards, capesize market slumped by the impact of Vale Brazil dam collapse in Brazil. Out of 16 Capesize and VLOC (Very Large Ore Carrier) sold for scrapping in Q3 2019, 10 bulkers were within a year of special survey. Cost of meeting IMO (International Maritime Organization) 2020 sulphur cap regulations, BWTS (Ballast Water Treatment System) legislation and the reduced trading opportunities for vintage tonnage triggered scrapping in the first three months. 43 vintage converted VLCCs (Very Large Ore Carriers) are expected to be scrapped soon in 2019.
In 2019, 2.5% of Western Australian iron ore exports are carried by bulkers over 15 years of age. Hence, removal of vintage bulk carriers will have a “pretty negligible” effect on the most liquid capesize market. There is not much older tonnage left in the fleet. 21 operating capesize bulk carriers are older than 20 years. 33 operating capesize bulk carriers are aged between 18 and 19. Scrapping of these vintage capesize bulk carriers will balance 57 newbuilding capesize and newcastlemax bulk carriers that will be delivered in 2019. 2019 capesize market is not expected to be as bad enough to induce the amount of scrapping needed to have a really significant impact on the supply-demand balance. Currently, capesize freight rates are at just above $4,000 per day.
Far East Horizon scrapped panamax dry bulk carrier for $2.5 million. Far East Horizon of China sold 1996 built 70K DWT M/V Richmond for demolition in Bangladesh for $275 per Idt. Far East Horizon of China bought M/V Richmond as M/V Pierre in 2009 for $22.5 million from OceanFreight. In June 2016, Far East Horizon sold 1998 built dry bulk carrier 45K DWT M/V Top Brilliance to another Chinese shipowner for $2.45 million.
Tai Chong Cheang (TCC) Hong Kong-based shipowner sold 2001 built 15-year-old capesize bulker 169K M/V CSK Radiance to scrap for $5.7 million. Currently, dry bulk shipping is at the rock bottom.
Demolition prices have led owners of post-panamax bulk carriers to direct their ships to the beaches in Bangladesh and India. Indian shipbreakers has dropped from $440 per ldt in January last year to around $250 per ldt today.