The ship recycling market has been characterized by a limited tonnage supply throughout 2021, thus limiting overall performance. In its end of year summary of the demolition market, shipbroker Clarkson Platou Hellas said that “it was hoped that we would be reporting on a more positive note as we head towards the end of 2021, however unfortunately, the ‘Omicron’ Covid variant has once again pushed the world back and questions have once again resurfaced in relation to ship deliveries, crew changes etc and whilst tonnage availability was expected to be aggressive this year, this proved to be further from the truth as a continued limited supply of tonnage was evident during the past 12 months”.

According to Clarkson Platou Hellas, the virus has continued to create difficulties for many regions having seen lockdowns and temporary halts to dismantling several times, with April seeing the recycling yards in India halting cutting operations due as all available oxygen bottles were diverted to the local hospitals and Pakistan encountering the same situation in May. With the container and dry bulk sectors experiencing an incredibly fruitful year, the lack of such candidates has been noticeable and the recycling industry has had to accept that market supply was limited and any available unit would predominantly derive mainly from the tanker, cruise, offshore and miscellaneous segments. Tanker earnings remained at generally low levels throughout 2021 with global oil demand and supply remaining below pre-COVID levels. While this meant that products tanker recycling rose to levels surpassing those seen in the last period of freight market weakness in 2018, that was not the case for the crude tankers, as vessels continued to find buyers for further trading. Oil demand and supply projections for the first half of 2022 point to the potential for a further period of softness, particularly if the Omicron variant leads to additional restrictions on economic activity in the first part of the year”.

Source: Clarkson Platou (Hellas) ltd

The shipbroker added that “in the second half of the year, oil demand, refinery runs and oil supply are currently projected to rebound to higher levels, driving a recovery in the freight market. This anticipation may continue to influence the amount of tonnage circulating into the recycling market and Owners will need to weigh up the potential near-term softness in earnings against a projected recovery later in the year. Developments with regards to those older vessels that were previously sold for further trading will create an additional level of uncertainty with respect to the amount of tonnage coming into the recycling market. Whilst there have been several tanker units concluded for recycling, the expectation was that there would be significantly more than what was witnessed as a large volume of the older tankers were committed at price levels substantially higher than the recycling prices at that time for alternative trades”.

Meanwhile, “global steel markets have risen to greater expectations during this year which has aided an incredible turnaround in price levels from the ship recycling markets. It is interesting to report that about 95 pct of the Indian Ship Recycling yards now hold compliance certification in relation to HKC (Hong Kong Convention) which is an incredible achievement in what is really a short space of time and the change to these yards is quite astonishing over the years. There certainly was not as many units as anticipated that required HKC Recycling, however the general view is that more emphasis and scope will be placed on Owners to take on these new considerations when looking at their recycling options. Bangladesh have been the most dominant recyclers this year having accounted for over 200 sales, India touching over 150 and Pakistan around 100 vessels concluded through the year”, the shipbroker said.

Clarkson Platou Hellas added that “looking further west towards Turkey, slot availability continues to cause some concern for those units requiring dismantling in accordance with the EUSRR (European Union Ship Recycling Regulation) laws. There are still several cruise ships being dismantled that were acquired towards the end of last year and there seems to be a continual supply of semi-submersible units, all of which require recycling at EU approved recycling yards. In addition to several tankers on these specific yards, currently very large LDT units are being dismantled at these Turkish EU approved yards so therefore, the time to recycle the vessels takes much longer and subsequently, we see a longer time for slots to free up on these yards. Turkey recyclers have had a constant stream of tonnage being offered to them that required dismantling at EU approved yards where 8 yards now hold such credibility. The Turkish buyers have been busy throughout 2021 with price levels exceeding USD 300/ldt on numerous occasions and have remained steady during the year. The question is how the New Year will begin in relation to price levels as they have recently experienced a currency devaluation which may hamper any increase in rates for some time. Unfortunately, the year also saw a handful of well-known

cash buyers withdraw from the market for varied reasons which placed extra burden on those cash buyers still active in the marketplace. With the loss of these cash buyers, it clearly shows how important the intermediaries are within the recycling sector, placing deposits directly into Sellers accounts, aiding sale transactions by purchasing tonnage ‘as is’ and subsequently moving the vessel from the delivery port to the recycling destination, purely reliant on information and the description provided by the Sellers followed by the risk that the actual recyclers may try to renegotiate their agreed terms. There have been testing times this year so let us hope 2022 brings a return to near normality”, the shipbroker concluded.

Marex Media