Strong demolition has been a prominent feature of the shipping industry this year, as challenging market conditions continue to drive a significant supply-side response in a number of sectors, according to Clarksons Research.

As conditions in most sectors were under pressure, 2016 has been an extremely difficult year for the shipping markets. Reflecting this, demolition has remained at elevated levels, and in January to November, 841 vessels of 41.3 million dwt were scrapped.

Demolition so far this year has already exceeded last year’s total of 38.9 million dwt, and whilst scrapping volumes have picked up in most sectors, some markets have played a more important role in this year’s tally than others, Clarksons said.

Bulker Beat

Amidst continued depressed earnings, bulk carriers have accounted for the lion’s share of tonnage scrapped this year. Bulker scrapping set a new record in the first half of 2016, and while demolition has slowed in recent months, 385 bulkers of 27.7 million dwt have been scrapped in the year to date. Bulker demolition has been historically firm since 2011, but the pace of scrapping in most bulker sectors this year has still exceeded the 2011-15 average, with Capesize and Panamax recycling this year around 1.4 times this level.

Boxship Bumps

Meanwhile, containership demolition has also made headlines this year, with increasingly young vessels being recycled. In dwt terms, boxship scrapping has totalled 7.9 m million dwt so far in 2016, but recycling volumes are already over triple that of full year 2015, with scrapping on track to reach a record 0.7 million TEU this year. The pace of demolition of ‘old Panamaxes’ has been running at more than twice the five year average, whilst scrapping has accelerated firmly in the 3,000 ‘wide beam’ sectors, with 6,000 TEU boxships also scrapped for the first time, Clarksons informs.

Big Hits On The Bodywork?

By contrast, despite the softening in crude and product tanker market conditions this year, tanker scrapping has remained relatively subdued, at less than half of the five year average. However, while gas carrier scrapping remains limited in numerical terms, with just 18 ships recycled so far this year, LPG carrier demolition is on track to reach around double the five year average after earnings fell swiftly to bottom of the cycle levels. Meanwhile, car carrier scrapping has soared to 27 units of 0.14 million CEU.

“This is already the second highest level on record, and on an annualised basis is four times above the 2011-15 average,” Clarksons said.

While total demolition this year is still falling short of 2012’s record of 58.4 million dwt, “2016 looks set to see yet another year of very firm recycling, eight years after the onset of the downturn.”

“In some sectors, this strong scrapping is providing a helpful brake on fleet expansion. Furthermore, with bruising market conditions having clearly taken their toll, many owners are likely to be looking to the demolition market for a little while yet,” according to Clarksons.