These are interesting times for the recycling industry as we turn the final corner towards the end of the year. Market sentiment in the ships demolition segment remains a big unknown, as the lack of tonnage is coupled with a general apathy from cash buyers. But while uncertainty remains, rising freight rates reveal interesting insights. Intra-Asia spot freight rate index has moved 3.6% m-o-m, largely on increasing enquiries amid rising seasonal rise in demand for various easy chemicals. Compared to Nov 2016, intra-Asia spot freight index has increased by 13.4% in Nov 2017. While there are numerous factors impacting the recent rise in freight rates, demolition sales prove telling. In plotting total demolition sales (for 1,000 DWT to 35,000 DWT vessel size segment) reported in a year against average spot freight rate indices for the period 2008 to Jan-Oct 2017, demolition sales increased when freight rates declined, and vice versa. 2015 and 2016 were exception years as demolition sales declined even though freights indices were on the southward journey, though this was the period when the IMO certificate of fitness (COF) removals were very high at around 1.1M DWT in 2015 and 2016, as against 0.2M DWT to 0.4M DWT during 2011-14. IMO COF removals were much less during 2008-10. While there are numerous factors impacting the recent rise in freight rates, demolition sales prove telling. In plotting total demolition sales (for 1,000 DWT to 35,000 DWT vessel size segment) reported in a year against average spot freight rate indices for the period 2008 to Jan-Oct 2017, demolition sales increased when freight rates declined, and vice versa. 2015 and 2016 were exception years as demolition sales declined even though freights indices were on the southward journey, though this was the period when the IMO certificate of fitness (COF) removals were very high at around 1.1M DWT in 2015 and 2016, as against 0.2M DWT to 0.4M DWT during 2011-14. IMO COF removals were much less during 2008-10. Average age at demolition followed a similar pattern, albeit with a lag though. With even a slight recovery in freight indices, vessels appeared sailing a little longer. Not surprisingly, with the rise in demolition sales, average age at demolition tends to decline, while average age tends to rise with decline in capacity sold for recycling. With the year drawing to end, demolition is likely to stagnate, albeit temporarily, thanks to the end of year rate hikes.
