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Containership scrapping is below forecast

December 30 - According to shipping research company, Alphaliner, containership scrapping will barely reach 400,000 teu in 2014, substantially short from the 500,000 teu forecast at the beginning of the year.

This year's scrapping volume thus remains notably below the all-time record of 2013, when ships totalling 442,000 teu were broken up.

The total capacity of containerships sent for scrap so far this year has reached 393,000 teu, of which 290,000 teu scrapped in the first half of the year. Scrapping activity has slowed down significantly since July, with only 103,000 teu sent for demolition in the second half.

A surge in year-end sales for demolition appears unlikely, as scrap prices have fallen from this year's high of USD500/ldt to below USD450/ldt currently in the Indian subcontinent.

In 2015, scrapping activity could be even more limited as the pool of potential scrap candidates has thinned down. A tentative ball park figure of 350,000 teu is plausible for the sake of supply forecasting, with the final outcome influenced by the scrap prices and the health of the world economy.

As a result of lower-than expected scrapping, the global cellular containership capacity is now expected to grow by 6.2 percent for the full year 2014, compared to earlier projections of 5.5 percent.

The delivery of new tonnage will reach 1.47 million teu in 2014, with a further 1.75  million teu expected to be delivered in 2015. These numerous vessel deliveries, including many large ships, coupled with the slower pace of scrapping of older vessels, could result in an aggregate supply growth of 7.6 percent in 2015, Alphaliner concludes.

Meanwhile, in a similar vein, HSBC's latest Transport Indicators report says that container shipping lines will need to be resourceful to support freight rates in 2015 with vessel supply set to remain significantly higher than demand.

The report notes that most of the 18,000 teu vessels are scheduled for delivery in 2015 and thus the effect of cascading may be more pronounced on other routes such as the Transpacific.

However, despite the structural mismatch between supply and demand, HSBC still expects the container shipping sector to return to profit after four consecutive years of losses due to the sharp decline in fuel costs and the enhanced economies of scale offered by the new generation of vessels.


www.alphaliner.com

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