Scrapping To The Rescue?

2 Feb 2018; The tanker market has started 2018 in the doldrums.  One of the main reasons for the depressed rate environment is the oversupply of existing tonnage.  On top of that, there are still a significant number of newbuilding deliveries scheduled this year for all the major vessel segments and because OPEC has vowed to keep its production cuts in place (at least through June), ton-mile demand growth may be limited.  That is why many tanker market observers are looking at demolition as a key driver to rebalance the market and restore health to the freight market.  The argument is that as tanker earnings regularly dip below operating expenses and more and more charterers discriminate against older (>15 years) vessels, demolition starts to look more attractive, especially with scrap prices on the rise.  The looming regulation changes with respect to Ballast Water Treatment Systems and the Sulphur content of bunker fuels and their associated investments also play a role.  What do we think that the practical impact will be of scrapping in the short to medium term? Please fill out the form to read the article.