Recyclingcould be the most significant factor in restoring shipping to a measure of equilibrium
Recycling, it has been suggested rather hopefully perhaps, could be the most significant factor in restoring shipping to a measure of equilibrium.
Overcapacity in the three main shipping sectors is not a hopeful scenario for the New Year, although the economic situation could always change for better or worse, such is the state of world trade in 2012 when even central bankers confess their uncertainty.
“I firmly believe that shipping will prevail and find calmer waters, as has always been the case, but when?” – writes BIMCO President Yudhishthir Khatau in his forward to the new BIMCO Reflections for 2012. There is a great deal of food for thought in this important BIMCO annual report.
History informs us that eventually, the wheel always turns on this cyclical, capital intensive industry. Certainly recycling could well be influential in helping reduce the overcapacity and in this particular era it could be even more influential than it has been in the past. With the operational economics of most sectors changing quite fast, it is likely that in a generally unpromising market, scrapping rather than idling could well prove to be a more attractive option.
Consider ships which were built from the mid to late 90s, a period when fuel was a good deal cheaper than it is today and other operational costs more reasonable. The technology tends to reflect the costs that appertain when a ship is built and considerable advances have been noted in the intervening years, with new ships between 15 and 20% more economic when compared to these ships which are past their second special survey. Today, answering the industry’s very different requirements, the technology is changing fast.
It is also impossible to ignore the environmental pressures that are piling onto ship owners, with the greatest pressure upon the oldest, less “green”, ships. If the market was favourable, these vessels could continue, despite these pressures, to earn money for their owners. But this is not the case and a more critical look will surely be taken at such tonnage and whether it would be better recycled.
Physical ageing is also a factor. There are, for instance, a growing number of tankers being disposed of prior to their Third Special Survey. This is of course a product of the terrible rates which are being paid at present, but a further influence could well be the state of the double hull ballast tanks in these “first generation” double hulled ships. Recoating such spaces, should the original coating have broken down, is a hugely lengthy and costly job in a repair yard, which could render a ship quite uneconomic and speed her towards the recyclers shears.
“Ageing” of another sort is likely to affect the container fleet, despite the type being traditionally one which has lasted extraordinarily well in the past. But the emphasis on scale economics and the limited scope for operating ships displaced by the new giants as feeders or in secondary routes is likely to see more ships in what has become the “middle” size range pensioned off quite early.
Will the demand for ship derived scrap steel be maintained to facilitate all this recycling? Once again, uncertainty about this market presses in, but the portents are not altogether discouraging. And while older, well-maintained, ships need not necessarily be hurried away on their final voyages, it is clear that new criteria may lead to a new look at what we mean by “old”!
Source: BIMCO, Watchkeeper