Any hopes of recovery in the crude tanker shipping market is dependent on the level of scrapping activity, according to a new report by global shipping consultancy, Drewry.
The ‘Tanker Forecaster’– released yesterday (Wednesday) – suggests that due to weak trade growth, a bloated order book and the ongoing overcapacity in the market, scrapping will determine the pace of recovery.
“We expect the market to start a gradual recovery from 2020. For any recovery before 2020, demolitions need to be strong enough to keep fleet growth slower than demand growth,” said Drewry’s lead analyst for tanker shipping, Rajesh Verma.
According to information from Drewry, scrapping activity has not increased yet but is expected to rise and gain momentum by the end of 2017 once the International Maritime Organisation’s Ballast Water Management (BWM) Convention comes into effect in September this year.
“In the existing fleet, there is about 20 mdwt [metric deadweight tonnage] of vessel capacity aged 19 years or more. Drewry assumes that all of these vessels will be scrapped during 2017-22,” said a spokesperson. Unattractive freight rates, poor employability and the additional costs associated with complying with the new IMO regulations – which would require ballast water to be treated before being released in a new location – would force owners to scrap the vessels, the spokesman added.
