Current spot market returns have fallen in the shipping market and are and are unlikely to rebound in a significant manner in the near term, argues one analysis. The solution to low rates is already in front of ship owners, scrapping of older ships. Low earnings do encourage recycling as owners are struggling to make OPEX level returns in most tanker markets.
There is now hope those looking at disposing of vintage units as steel prices in China are rising, which is driving up the $/ton cost for scrap buyers in India. A 105kt Aframax tanker may have a lightweight of about 18kt, which is used to determine the scrap value of a ship. The value that can be realized for a ship has increased from $4.75mn USD to over $7mn USD. This is not a trivial amount for someone looking at losing $7k/day in today’s market with a 20 year old ship.
Briefs: Bulls in the complex product tanker markets are betting that healthy expansion of global product trades will result in a sustainable recovery in the sector this year. So far, they are losing the battle to the bears amid .
Then again, even though the market has picked up, the new building industry continues to be in serious trouble. A lot of yards will have to fold up before there prospect of the industry improves substantially.