Tanker scrapping resumes

Tanker demolitions have picked up this month, but the total number of vessels scrapped this year remains significantly lower than last year.

Argus data show that five vessels were scrapped in July — three Handysize tankers, one Medium Range (MR) vessel and one Suezmax shuttle tanker. It takes the total for the year so far to 20 vessels, or 1.6mn deadweight tonnes (dwt). This compares with 30 vessels, or 3.42mn dwt, in January-July last year, and 121 vessels, or 17.24mn dwt, in the same period of 2018.

Elevated spot market freight rates discouraged shipowners from scrapping vessels in the first half of 2020. The limited scrapping activity, combined with the fact that around 43pc of new tankers in the 2020 orderbook were delivered in the first half of the year, has led to a 2pc increase in the global crude tanker fleet this year, according to shipbroker SSY.

The overall global tanker fleet has grown by 117 to 6,991 vessels since the beginning of 2020, but the orderbook for new ships is lower than in previous years. For some classes, vessels over 15 years old are discounted from prevailing market rates, and just under 28pc of the current world fleet falls into this category.

Scrapping has faced added challenges over the last few months, with the Covid-19 pandemic and the monsoon season in southeast Asia combining to bring most shipyards to a standstill. Scrapping tends to pick up again when the monsoon season winds down in September and October, but the resumption is likely to be limited as the seasonal uptick in spot tanker market rates could encourage owners to postpone scrapping until 2021.

By Nikos Kokolinakis