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Oct 12 2016

Container ship scrappage has reached record levels in 2016, already exceeding the previous record year with several months still to go, and more than three times higher than the historical trend of around 1% annually. It appears to mark an end in shipowner policy of holding off from scrapping vessels because of low steel prices.

So far this year, 147 box vessels have been sent to shipbreaking yards, the equivalent of 507,000 TEU being removed from the market. This compares with the figure of 185,000 TEU in 2015 and the current annual record set in 2013 when 427,000 TEU of capacity was lost. For the year as a whole, it is estimated that trading capacity in the region of 670,000 TEU could be removed from the cellular fleet. This comprises both post-Panamax 10,000 TEU+ vessels in the Ultra Large Container Ship (ULCS) sector, as well as the smaller Panamax and feeder ships. In terms of the percentage of trading capacity removed in 2016, this will represent 3.4% of the global container ship fleet when the historical trend is approximately 1% annually.

For 2017/2018 it is anticipated that there will be a marginal slowdown in demolition compared to 2016, though if time charter earnings increase, even marginally, the number of ships being sold for demolition could significantly reduce. The market is very fluid; if vessel earnings increase, demolition stops and vice versa. Deliveries of new ships in the ULCS sector in 2016 would exceed 700,000 TEU. In terms of the whole market, the volume of TEU capacity to be added by new ship deliveries in 2016 is estimated to be 1.1 million TEU. This will result in net fleet growth in 2016 of approximately 2.2% compared to 8% in 2015 and 5% in 2017.

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