Scrapping levels likely to remain in line with prices paid says CSM Energy.

Press Release: Vessel scrapping activity this year is likely to mirror the continuing rise in scrap prices, but a lot will depend on movements in the freight markets, order book levels, as well as new vessel deliveries and the anticipated return on investment on existing engine modifications, according to Johann Meyer, Managing Director of CSM Energy.

The shipping industry continues to remain unaligned on the best solution going forward, environmentally and commercially, with some owners likely to favour engine modifications of existing tonnage, instead of recycling, as they seek to follow industry developments before committing to any new building contracts. They may want to keep up the minimum emissions requirements while also taking advantage of market rises, he said.

“It is impossible to predict long-term market developments of future fuels given the various influencing factors. The actual uncertainty of the industry started up a kind of vigilant phase where the majority of new orders or modifications are heading towards alternatives but still using carbon fuels – where the ultimate goal should be usage of zero carbon fuels in future.

“Development of the recycling industry in this respect, will depend on the potential middle phase of carbon neutral fuels which would mean a slight increase in activity. The ultimate change to zero carbon tonnage will force a major increase in recycling activity and this will, most probably, be close to the lifecycle end of the newbuilding orders using carbon fuels,” he said.

Scrap prices will continue to rise this year but become stable at a higher level throughout the year, he added. “This all depends on the market, negative or positive as well as the political situation. Container rates are still flying high and owners are better off selling their tonnage or riding the wave of daily time charter rates. Whereas the tanker market is likely to pick up more as expected, so owners will try to keep their tonnage or buy in cheaper units on a speculative basis,” he said.

Mr Meyer said the current regulations and conventions are building the foundation for the necessary changes in the ship breaking market. “While environment, social and governance are the right additional tools to introduce, evaluate and thrust the important mind set change of the industry – it can only happen if companies are taking it with the required seriousness and not as a marketing campaign.”