Tanker vessel scrapping to rise further in 2018 across the world - Report
Business Standard reported that scrapping of tanker vessels across the world is expected to rise significantly in 2018 as earnings for shipowners per tanker vessel might decline amid rising crude oil prices, drop in China’s crude stocking activity and also ahead of the International Maritime Organization (IMO) regulations coming into effect in 2019-2020.
Mr Ranjit Singh, executive director and chief executive officer, Essar Shipping, said that “Scrapping of tanker vessels globally is expected to go up further in 2018 and may even be more than the quantum of 2016 and 2017 put together. This will bring in a sharp demand-supply correction in the tanker market.”
Panamax, Aframax, Suezmax and Very Large Crude Carriers (VLCCs) are among the different types of tanker vessels in the market.
With crude oil prices continuously on the rise, experts said storage as well as trade demand for the commodity might not remain strong. This would lead to scrapping of vessels.
In 2018, storage requirement of China, the world’s second largest consumer of crude oil, could also drop. According to the International Energy Agency data on China’s implied stock changes, the country should have accumulated close to 520 million barrels since 2015, well above the special petroleum reserve (SPR) capacity that was supposed to fully come online by 2020.
Mr Rajesh Verma, lead analyst (tanker shipping) at maritime research consultancy Drewry, said that “There is pressure for scrapping in tanker market and nearly 25 per cent of vessels below 20 years of age are going for scrapping. This is expected to continue in the coming year as well.”
Tanker vessel life is usually between 20 and 25 years and scrapping usually takes place between 22 and 25 years.
He said that “Scrapping activity in the market is also likely to increase because of bearish freight market outlook and additional costs associated with the forthcoming IMO regulations.”
The IMO announced the effective date for the reduction of marine fuel sulphur would be 2020. Under the new global cap, ships would have to use marine fuels with a sulphur content of no more than 0.5 per cent against the current 3.5 per cent to reduce greenhouse gas emissions. Another regulation, pertaining to Ballast Water Management, was aimed at protecting the marine environment from transfer of harmful aquatic organisms in ballast water carried by ships.
Source : Business Standard