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$1bn cargo vessels scrapped for steel in H1 2021, says report

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The latest report by VesselsValue has revealed that about 275 cargo vessels worth $1 billion were scrapped in the first half of 2021.

The report made available to The Guardian showed that the scrap record was up by 40 per cent and 33 per cent compared to 2020 and 2019, respectively.

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“The 275 scrapped vessels have a combined deadweight tonnage (DWT) of 11.9 million and a total scrap value of over $1 billion. 131 tankers were scrapped, accounting for nearly half of all cargo vessels scrapped in the first half of 2021,” it stated.

The increasing scrapping numbers, according to VesselsValue, are a direct result of exceptionally high scrapping rates, which rose and continue to rise throughout 2021.

“The end of the first half of 2021 saw container scrapping prices reach $600 LT, levels not seen for nearly 13 years. The surge in scrapping prices has been fuelled by the ever-growing rise in steel price and demand. A demand catalysed by lockdown restrictions causing logistical issues for construction sites across the world.

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“The unprecedented earnings are seen in H1 2021 for the Bulker and Container sectors saw owners capitalise in both the charter and S&P market, turning their back on the demolition market despite the lucrative scrapping prices. Tanker owners, however, were more tempted by the high scrapping prices, but still, the majority are choosing to cling onto older assets in the hope of a full market recovery,” it stated.

The report further stated that financial pressures forced upon the offshore sector due to COVID-19 have seen many owners scrapping their non-core assets, describing as a result of pre-agreed bankruptcy agreements, which require complete fleet reviews.

“The end of H1 2021 scrap price is 86% higher compared to the scrap price end of H1 2020.

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“The number of tankers scrapped in H1 2021 is up four-fold compared to 2020 and 2019. For reference, the total number of tankers scrapped throughout 2020 and 2019 were 92 and 91 respectively. It would not be a surprise if tanker scrapping continues to grow as earnings continue to remain at extremely low levels.

“Despite the high scrap prices, Bulker owners are tentative to scrap any older tonnage due to the exceptionally high earnings. Scrapping numbers have remained comparatively low for H1 2021, down 13% from H1 2020.

“Expectedly, Container scrapping numbers are down 78 per cent from 2020 as the sector relishes the extreme earnings. Seven of the 10 containers scrapped this year, were small Feedermaxes, all 25 years or older. Even if scrap prices continue to rally upwards it is unlikely that we will see many more Containers scrapped in the second half of the year,” it stated.

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