5th February 2010 - If Not Where - When?

In what is the last official year of the IMO single hull phase-out, it will probably come as no great surprise that 1.2Mdwt of tanker tonnage has already been sold for scrap in 2010. With plenty of potential candidates and the deluge of new tonnage scheduled to be delivered over the next few years (with or without cancellation or delay), it doesn't take a genius to realise that 2010 should be a heady year for tanker demolition. The sheer volume of tanker tonnage for disposal may be the only stumbling block given that Bangladesh is the favoured destination for tanker demolition sales.  Last year 62 of the 93 tankers sold for recycling found their way to the beaches of Bangladesh, mainly due to the higher lightweight prices on offer and the attraction of not requiring gas-free certification. The dangers of this kind of work were highlighted at the very end of last year when several workers were killed or injured while cutting apart a tanker.  Incidents such as this will add to international pressure on the traditional shipbreaking nations to accept tighter regulation as proposed by the IMO's Hong Kong convention, which was adopted last year but as yet has no signatories. To put this in greater perspective 5.7Mdwt (79%) of last year's 7.2Mdwt (world total) of tanker demolitions went to Bangladesh, more than double the previous year. Any significant changes to existing practices could have implications on both ldt price and perhaps more significantly capacity.

Looking back at last years statistics, 10 VLCCs were sold for demolition with 9 of the sales concluded from August onwards. The largest tanker being the FRONT VANADIS (285,873 dwt) which fetched $325/ldt. The highest price was achieved by the VL MALIBU (248,976 dwt) at a reported $378/ldt. There were 4 Suezmax sales, while Aframaxes accounted for a further 15, with 12 Panamax and 38 MRs also removed. The malaise, particularly in the product tanker sector over much of 2009, was believed responsible for many of the removals.

Given the circumstances surrounding last year, demolition prices remained comparatively firm although well below the lightweight levels achieved in 2008. The first VLCC sale this year achieved $415/ldt and price strength is apparent across all sectors, with Indian breakers very prominent.  With 13% of the existing tanker fleet still single hull, there are still plenty of candidates available for this less glamorous part, but nonetheless, important part of the industry.