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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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Monday, 01 November 21
COAL PRICES HAVE FURTHER ROOM TO DROP: TOP ECONOMIC PLANNER - GLOBAL TIMES
China’s top economic planner said coal prices have further room to drop on Friday, as the most traded coal futures dropped to below 1,000 yua ...
Saturday, 30 October 21
CHINA'S COAL PRICES SEE BIGGEST WEEKLY FALL IN MORE THAN 5 YEARS - REUTERS
China’s coal futures prices saw their biggest fall in more than five years after the powerful state planner said there is still room to adjus ...
Saturday, 30 October 21
G-20 LEADERS PREPARE STATEMENT TO STOP FUNDING FOREIGN COAL PLANTS - BLOOMBERG
Leaders of the Group of 20 wealthy economies are preparing to pledge to stop funding foreign coal-fired plants, but are still wrangling over climat ...
Friday, 29 October 21
APAC THERMAL COAL SUPPLY TO REMAIN TIGHT AS WINTER LOOMS - FITCH RATINGS
APAC thermal coal prices have surged, hitting historically high levels. The benchmark Newcastle 6,000kcal/kg grade coal reached USD228/tonne in mid ...
Thursday, 28 October 21
CANADA BAN ON SHIPPING COAL WOULD EQUAL SCRAPPING AS MANY AS 3 MILLION CARS - IEEFA
Canada ban on shipping coal would equal scrapping as many as 3 million cars
Change in Canadian policy could have major implications ...
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- Bulk Trading Sa - Switzerland
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- Wood Mackenzie - Singapore
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- Sojitz Corporation - Japan
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- New Zealand Coal & Carbon
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- Toyota Tsusho Corporation, Japan
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- Energy Link Ltd, New Zealand
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- Jaiprakash Power Ventures ltd
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- Australian Coal Association
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- Posco Energy - South Korea
- Bhoruka Overseas - Indonesia
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- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- European Bulk Services B.V. - Netherlands
- Parry Sugars Refinery, India
- Commonwealth Bank - Australia
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- Mintek Dendrill Indonesia
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- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
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- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- The University of Queensland
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- Dalmia Cement Bharat India
- Videocon Industries ltd - India
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Planning Commission, India
- Miang Besar Coal Terminal - Indonesia
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Global Business Power Corporation, Philippines
- Malabar Cements Ltd - India
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Merrill Lynch Commodities Europe
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- Kapuas Tunggal Persada - Indonesia
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- Eastern Coal Council - USA
- Ministry of Mines - Canada
- Ministry of Transport, Egypt
- Aboitiz Power Corporation - Philippines
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
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- Wilmar Investment Holdings
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- SMC Global Power, Philippines
- Krishnapatnam Port Company Ltd. - India
- PowerSource Philippines DevCo
- Iligan Light & Power Inc, Philippines
- Standard Chartered Bank - UAE
- Ambuja Cements Ltd - India
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- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- Rio Tinto Coal - Australia
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- CIMB Investment Bank - Malaysia
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Deloitte Consulting - India
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- Vijayanagar Sugar Pvt Ltd - India
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- Kalimantan Lumbung Energi - Indonesia
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- White Energy Company Limited
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- Tamil Nadu electricity Board
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- Electricity Authority, New Zealand
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- The Treasury - Australian Government
- Gujarat Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Siam City Cement PLC, Thailand
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- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- Economic Council, Georgia
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- Jindal Steel & Power Ltd - India
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