Generally lackadaisical economic conditions have beaten down shipping demand, which is consequently sending vessels to the scrap heap in record numbers.
According to a report from British shipping industry monitor Vessel Value, ships with the capacity to haul 52 million metric tons of load are being beached and scrapped as carriers struggle to deal with stagnant growth, which is expected to last over two to three years.
The trend is second only to the 2012 carnage, when 61 million tons worth of capacity was slaughtered. It also counters the growth path in the five years through 2015, when liners ordered around 1,500 ships annually. In the first six months of this year, shipyards booked 293 vessel orders, or a total of almost 12 million tons.
“Given the tremendous overcapacity, it will take much more recycling and at least two to three years of no growth in capacity to see some balance between supply and demand,” New York-based Karatzas Marine Advisors Co. chief executive Basil Karatzas told reporters.
“What’s changing is that younger ships are being scrapped, but recycling won’t solve overcapacity on its own,” Maersk Line chief executive officer Soren Skou further observed. “Only market growth can do this.”
Additionally, Skou said that Maersk scrapped only about 1% of its total capacity, but expects to send more vessels to the recycling yard in the next three to five years.