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Low number of new orders good for dry bulk shipping: Bimco
Thursday, 24 March 2016 16:07

With only four newbuilding orders registered in the first 12 weeks of 2016, dry bulker orders are merely a fraction of previous year’s activity according to the latest statistics from shipping analyst BIMCO.

However, demolition has had an impressive start to 2016 having already scrapped 144 dry bulk ships already this year. In January and February 2016 the industry saw a rise of 43 per cent of tonnage scrapped compared to 2015.

New contracts for dry bulk ships have been on a path of decline in the last year and a half even with 12-year low newbuilding prices.

BIMCO’s latest report said that the four orders for newbuilds totals 267,000DWT, less than a tenth of the 2.8 million DWT placed by the end of February last year.

“The low level of new orders is a much needed development in the market,” said BIMCO’s chief shipping analyst, Peter Sand.

“With little to no influence over demand side developments, reducing supply is the only tool owners and operators on the dry bulk market can use to improve on the market situation. The best way to do that is to limit the amount of new orders and increase scrapping.”

In 2015, 30 million DWT was scrapped as a record high level was reached in the first half of the year. In the period February to May 2015, the level of scrapping closely followed the level of deliveries, helping to limit the fleet growth. In February and April, the level of demolition actually surpassed the amount of new deliveries coming in. Entering into the second half of the year however, scrapping slowed down substantially, while deliveries carried on at the same pace.

Despite the low ordering activity, there is still a large order book for future deliveries. This is evident by the fact that 13.2 million DWT of new tonnage was delivered in the first two months of 2016 a slight increase compared to last year’s 11.6 million DWT.

“The increased demolition is taking place despite the fact that the scrap steel prices offered to owners wishing to sell their ship for demolition is run down by a low demand for scrap steel,” Peter Sand added. “The fact that so much has been scrapped in the first two months alone supports our prediction that 2016 will be the busiest year for breaking of dry ships ever."

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