Containership demolition reach all time high and provides a positive surprise for the struggling container shipping industry.

BIMCO has focused on the level of demolition in the container shipping industry throughout 2016 and the high level of demolition activity has continued its pace and exceeded our expectations.

“The demolition activity in the last three months’ surprised BIMCO positively and it exceeded our initial expectation based on the appalling 2015 demolition activity,” said BIMCO’s Chief shipping analyst Peter Sand. “The advance is a push in the right direction, as demolition activity is one of the essential measures needed to be taken to rebalance the container shipping industry”.

So far 500,000 TEU have been scrapped, 4.2 times more TEU than the scrapping activity for the same months in 2015. With the last three months accounting for more than 41 percent of the total demolition in 2016, demolition activity is picking up and is primarily generated by the Panamax container ships. The demolition of panamax containerships in TEU accounts for 47 percent of the total demolition in 2016, while TEU scrapped from Intermediate and feeder containerships account for 30 percent and 23 percent respectively. The demolition of intermediate container ships has had a great return from only being scrapped one month in 2015.

“It is important that the demolition of excess capacity comes sooner rather than later, as there is still a huge delivery schedule hanging over the container shipping industry for the rest of this year and well into 2017 and 2018,” said Sand. “However, the high demolition activity is currently softening the net supply growth rate of the container shipping capacity and will prevent a darker outlook for the years to come, if maintained.”

The demolition of intermediate containerships is a strong signal, for the measures taken in the container shipping industry, as they generally are bigger and younger than the panamax and feeder containerships.

The high level of scrapping comes in the aftermath of BIMCO reporting the lowest level of newbuilding contracts in 20 years. Container contracts were down 84 percent for the first eight months of 2016 compared to the same period in 2015.

“The events in 2016 have shown, that the tools to turn the container shipping industry around are being used and are working,” said Sand. “The recommendations to consolidate fleets and demolish ships are being taken serious within the industry.”