Shipping in Crisis – Better Call the Demolition Girl
Autor: Cesar Nagatomi | Publicado: 2012-03-08T04:33:00-08:00





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Shipping in Crisis – Better Call the Demolition Girl06/03/2012

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A popular recording on YouTube features four-year-old Becky calling a demolition company to get a price for knocking down her school. Making sure all her teachers are inside at the time is a key feature of the deal. When the demolition man says he won’t get away with that, Becky reassures him he will, because nobody likes them. Well, that's one way of solving your problems.




A popular recording on YouTube features four-year-old Becky calling a demolition company to get a price for knocking down her school. Making sure all her teachers are inside at the time is a key feature of the deal. When the demolition man says he won’t get away with that, Becky reassures him he will, because nobody likes them. Well, that's one way of solving your problems.Let's Recycle Our Problem Too&nbsp;With this sort of background Becky would make a good shipping analyst. At the beginning of ominous shipping recessions, she could urge everyone to scrap their ships. But scrapping ships is no more popular with their owners than blowing up schools is with their teachers. Admittedly, scrap prices are at record highs, but for the owners of ageing ships, there's always the chance that a market spike will make them a fortune. So, ultimately, scrapping depends more on market pressures than exhortation.The Very, Very Old&nbsp;One key pressure is age. Since the Lehman Bros. collapsed in 2008, 3,677 ships of 115m dwt have been scrapped. Most of them were pretty old (see graph). The average age was 31.5 years, but the spread was wide. The grand daddy was a bulker called the E.M. Ford which was scrapped in November 2008 at the ripe old age of 113 years. Of course there is a story. It was built for the Great Lakes and was a classic ship (though that didn't save it). But quite a few of the “scrappers” were small, specialised vessels of over 50 years.The Very, Very New&nbsp;At the other end of the spectrum, scrapping started at 14 years of age. However, the tonnage scrapped before 20 years, generally for technical or tactical reasons, was pretty small (see graph). For example, several double hull VLCCs, scrapped at 14/15 years by corporates, were not offered for continued trading. But with the scrap price approaching $20m for a 300,000 dwt VLCC, this did not involve a major financial sacrifice.Looking Ahead From a market perspective, about 8% of the present world fleet was scrapped in the three years. The current orderbook is 23%, so scrapping at that pace would offset about a third of the orderbook. But could much more be scrapped? Around 160m dwt was built between 1981 (30 years ago) and 1990 (21 years ago). If everything is scrapped it would neutralise almost half the orderbook. But to wipe out a decade of shipbuilding in three years would require a pretty awful market.Dreaming About Demolition&nbsp;So there you have it. Since the great collapse of 2008, the average scrapping age has been 30 years. Scrapping everything built in the 1980s would make a 50% hole in the orderbook. But that’s a very tough target. So, as an insurance policy, Becky recommends getting her friendly demolition man in Dublin to blow up the whole lot, ideally with a few shipyards in side them. Have a nice day.







Dr Martin StopfordMartin Stopford joined Clarksons in 1990 and was previously a Vice President at Chase Manhattan Bank and a Director of British Shipbuilders. He was appointed to the Board in September 2004. Martin is also head of Clarkson Research.crs@clarksons.co.uk



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