Dry rise slows scrapping

Malcolm Latarche
Malcolm Latarche

31 March 2017


Last year it seems that everyone in the container and bulk sectors was calling for increased scrapping to allow the sectors to keep their heads above the water. But with the Baltic Dry Index at three times the lowest level it reached last year and pushing towards a three-year high, confidence is definitely returning to the sector. And as the BDI rises so does the price being offered for scrap vessels. Last year, sellers of bulk carriers were lucky if they could manage to persuade scrap buyer to part with $250/LDT but now the price is nudging towards the psychologically important $400/LDT. That has been caused by a drop in the number of vessels being offered with it being quite likely that the first quarter of 2017 will see scrapping below half that of last year. One reason beyond the rise in the BDI for the lack of vessels being offered for scrapping could be the fact that shipowners have now realised that instead of having to scrap aged bulkers after 7 September this year if they do not have a ballast treatment system, they could decouple the IOPP certificate and for the cost of an IOPP survey gain an extra five years of trading. Assuming the trading situation continues to improve and with an extra five years under their belt, bulker owners could see scrap prices rise further still. The skill then is knowing when the scrap price is near peaking so that they can offload their oldest vessels for the best price.