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Wednesday, 17 March 21
MARKET INSIGHT - INTERMODAL
 Shipping market players are familiar with the inverse correlation between the freight market and demolition activity i.e. when the market picks up we usually observe demolition activity declining and vice versa, while the level of scrapping eventually contributes to a new market equilibrium.
In order for demolition activity to be impacted in either direction, market expectations for the medium term have to be aligned with actual freight market conditions and thus demolition activity reacts with some time lag to the current freight market environment. The decision to sell a vessel for scrap is not only driven by the state of the market cycle and expectations, but to a great extent by the offered scrap price at the time vs the price fetched at the 2nd hand market.
As we stand, owners of vintage tonnage are obviously trying to exploit the current sound performance across all Dry Bulk & Container segments and prefer to keep their vessels for further trading rather than turning to beach yards. Despite positive market conditions in these two segments, possible demolition candidates could be those old units that have to be docked for surveys and their Owners are not in favor of bearing this cost, or the parties that are looking for a fleet renewal. Still, in order to make the demolition decision tempting for them, scrap prices should rise further. Already, scrap prices have risen more than 10% since the beginning of the year, and are up more than 29% compared to last year.
So far during Q1 2021, the freight market and expectations in the Dry Bulk & containers segment have been extremely optimistic, whilst the wet market is still to recover from the severe downturn experienced as a result of oil supply cuts and soft demand amid the ongoing COVID-19 pandemic. YTD dry bulk scrapping rate in dwt terms is estimated -21% below the same period last year, while tankers scrapping is estimated +91.1% y-o-y.
However, taking a closer look at the tankers sold for scrap, we would expect that the current market conditions (with VLCC rates suppressed since the beginning of the year and recently turning negative) would favor the larger crude carriers towards scrap yards. Instead, since the beginning of the year, about 11 vessels were confirmed to be scrapped with half of them being Handysize or MR tankers, while the rest consist mainly of Aframax, two shuttle tankers and no VLCCs.
We could argue that maybe owners of the larger crude tankers have enough buffer from last year’s stellar earnings amid floating storage economics skyrocketing and thus can sustain adverse market conditions, but also expect that the market will turn a corner should OPEC+ reverses oil supply cuts in the next months. We could also argue that owners prefer to sell their vessels in the 2nd hand market, as the premium they are currently getting over selling them for scrap is quite substantial.
While scrap prices are expected to rise further during the 2H of the year amid increased demand for scrap restocking, it remains to be seen how all of the above factors will impact demolition activity across the different shipping segments, with expectations for tanker scrapping activity increasing nonetheless coming in higher.
By George Kallianiotis,
Valuation Department
Compiled by:
Intermodal Research & Valuations
Analysts:
Ms Eva Tzima
Mr.George Panagopoulos
Disclaimer and legal disclosure: For any further queries please do not hesitate to contact our Research & Valuations Department. The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without making guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no reproducing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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- International Coal Ventures Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Bhoruka Overseas - Indonesia
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- Kideco Jaya Agung - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- Leighton Contractors Pty Ltd - Australia
- Australian Commodity Traders Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- London Commodity Brokers - England
- McConnell Dowell - Australia
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Merrill Lynch Commodities Europe
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- Independent Power Producers Association of India
- Africa Commodities Group - South Africa
- Ministry of Transport, Egypt
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- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Singapore Mercantile Exchange
- Kapuas Tunggal Persada - Indonesia
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- OPG Power Generation Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
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- Eastern Coal Council - USA
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- Sical Logistics Limited - India
- Global Green Power PLC Corporation, Philippines
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Star Paper Mills Limited - India
- Interocean Group of Companies - India
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- Energy Development Corp, Philippines
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- Vedanta Resources Plc - India
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- Electricity Generating Authority of Thailand
- Indian Energy Exchange, India
- Jindal Steel & Power Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Sojitz Corporation - Japan
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- Xindia Steels Limited - India
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
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- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Jaiprakash Power Ventures ltd
- Sree Jayajothi Cements Limited - India
- Malabar Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- Gujarat Sidhee Cement - India
- Billiton Holdings Pty Ltd - Australia
- Videocon Industries ltd - India
- Oldendorff Carriers - Singapore
- Agrawal Coal Company - India
- White Energy Company Limited
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Tamil Nadu electricity Board
- Bayan Resources Tbk. - Indonesia
- Bhatia International Limited - India
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Mercator Lines Limited - India
- The State Trading Corporation of India Ltd
- Ceylon Electricity Board - Sri Lanka
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- TNB Fuel Sdn Bhd - Malaysia
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- Carbofer General Trading SA - India
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- Georgia Ports Authority, United States
- Intertek Mineral Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- Ind-Barath Power Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Cigading International Bulk Terminal - Indonesia
- Kaltim Prima Coal - Indonesia
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Marubeni Corporation - India
- CNBM International Corporation - China
- Simpson Spence & Young - Indonesia
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Kalimantan Lumbung Energi - Indonesia
- Central Electricity Authority - India
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Trasteel International SA, Italy
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Rashtriya Ispat Nigam Limited - India
- Indika Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
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- The University of Queensland
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- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- New Zealand Coal & Carbon
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- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Petron Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
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- Savvy Resources Ltd - HongKong
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
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- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thiess Contractors Indonesia
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Baramulti Group, Indonesia
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Central Java Power - Indonesia
- Australian Coal Association
- Economic Council, Georgia
- Chamber of Mines of South Africa
- The Treasury - Australian Government
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- GAC Shipping (India) Pvt Ltd
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- Mintek Dendrill Indonesia
- Madhucon Powers Ltd - India
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