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Panamax fleet bears the brunt of boxship demolitions

Tuesday 05 November 2013, by Sarah Bennett

Segment under threat offers fewer economies of scale
AS CONTAINERSHIP owners scrap ever-younger ships to curb their losses and consolidate their fleets, panamax-sized vessels have borne the brunt of the onslaught.

Most likely to be scrapped are ungeared panamax boxships in the 3,000 teu-5,000 teu size range that offer fewer economics of scale than larger ships and have less choice of trades as smaller regional ports cannot handle them.

So far this year, 60% of the total scrapped boxship capacity has been panamax-sized, amounting to 192,000 teu.

The figure is nearly double the capacity scrapped featuring this size vessel last year, according to Lloyd’s List Intelligence.

Younger ships are also under threat of demolition. The average age of ships scrapped this year is 22 years old.

The youngest fully cellular containership scrapped this year was the 13-year-old, 1,700 teu boxship Soraya, owned and operated by CMA CGM subsidiary Comanav.

Before it was sent for breaking at Alang, India, in January, the ship traded between Benghazi, Libya, and Marsaxlokk, Malta.

Lloyd’s List Intelligence expects 450,000 teu to have been scrapped by the end of 2013 across all types of boxships and for panamaxes to make up around half of this total.

Last year, approximately the same amount of tonnage was scrapped in January-June as in July-December — 167,000 teu in the first six months and 166,000 teu in the second six months.

If the trend is repeated this year, the 250,000 scrapped in January-June suggests that some 500,000 teu will be scrapped during the year as a whole.

Containership scrapping rates have accelerated in line with fleet growth.

The amount scrapped in January-September 2013 is 320,000 teu — 47% more than the 217,000 teu scrapped during the same period in 2012, according to Lloyd’s List Intelligence data.

However, demolitions in 2012 represented only 2% of global fleet capacity.

As oversupply increases with the delivery of larger vessels, shipowners and carriers have limited options when it comes to curbing that trend.

As bigger ships join the Asia-Europe route, smaller ships cascade onto other routes but certain ship sizes have less choice when it comes to alternative deployment.

Small feederships have a future trading on intra-regional routes and post-panamax ships larger than 5,000 teu are flexible enough to serve an array of trades.

However, panamax ships offer fewer economies of scale and are under threat from fleet rationalisation by carriers.

The main trades deploying panamax ships are routes to Australasia and Africa. Panamaxes make up around half of total capacity on the transatlantic route, a quarter on the transpacific and 7% of the Asia-Europe trade.

Continued cascading of smaller vessels off the main east-west trades will push down the share held by panamax ships even further.

Not all panamax-sized ships are destined to be scrapped, however.

Specialist wafmax vessels have capacity of 4,500 teu and are the largest ships able to call at many West African ports.

The region has been plagued with multiple smaller ships vying to load and offload, creating longer port waiting times. The world fleet of 22 wafmaxes offers greater efficiency, based on faster weekly direct calls between Asia and West Africa.

Even though scrapping is expected to be high this year, it is nevertheless a drop in the ocean, set against a total container fleet of some 16m teu.

However, if global container demand remains sluggish, similar demolition trends are likely to continue into 2014.

Sarah Bennett is the container market analyst at Lloyd’s List Intelligence.

This analysis was featured in lloydslist.com and uses data and insight from Lloyd’s List Intelligence.

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