4th June 2010 - Demolition 'Temporarily' Down To Scraps!

2010 was always anticipated to be an exceptional year for tanker demolition activity given the heightened intensity of what was designated to be the final year of the single hull phase out. The assumptions were that a record amount of tanker tonnage would be recycled as the areas of employment and the opportunities for single hull tankers diminished. Looking at the chart below it can be clearly seen that the year commenced with a flourish and in fact tanker demolition in the first 5 months of this year has already exceeded the total for 2009. In particular, March and mid April saw a surge of sales as the lightweight price for Bangladesh touched the $500 mark. VLCC demolition sales have so far reached 11 for the year with 3 in February, 5 in March with one in each in the remaining months, still some way to go to equal the 27 scrapped in the whole of 2003. The two most recent VLCC sales went to Pakistan and China, the first sales outside of Bangladesh also since 2003.

Demolition prices have softened in recent weeks with India/Pakistan range currently offering around $400. Exchange rates, particularly in India, have also placed further downward pressure on lightweight prices which may have put off some sellers. Bangladesh, the most favoured destination for tanker demolition, is currently out of the market as yards protest against High Court plans to tighten environmental standards. However, this will have little effect on the current market as we have reached the monsoon season where beaching of any kind of vessel becomes tricky. It is difficult to predict in which direction lightweight prices will go over the coming months, but with 36 million of single hull tonnage still to be demolished we are likely to see a busy autumn of activity at whatever prices are on offer. Even allowing for all the recent negatives in the demolition market, we still anticipate tanker scrapping for this year will more than double to just short of 16M dwt.