Scrap market cools down

Tankers sold for scrap at ship breaking yards fell 40% during the first seven months of the year as surging freight rates prompted owners to keep vessels in service, London-based shipbroker Simpson, Spence & Young said.

About 60 oil tankers totalling 5.5 million dwt were scrapped during the period, down from 101 vessels with a capacity of 11.5 million dwt in the same period in 2003. ‘The continued prevalence of firm trading conditions for tankers has instead made owners very reluctant to part with even very old units,’ the shipbroker said. Demand for oil tankers has surged, boosting freight rates, as the OPEC increased oil production. This has made it profitable for shipowners to keep their vessels in service.

‘This large drop in tanker fleet removals has been despite the unprecedented high scrap prices paid,’ Simpson, Spence said. Scrap prices rose to a record $420 in Bangladeshi shipyards during April and in China in February. The high level of tanker scrapping in the first seven months of last year was partly caused by greater demand for modern ships following the sinking of the Prestige oil tanker off Spain the year before, the broker said.