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Bimco warns on slower dry bulk scrapping in H2 2016

Dry bulk shipowners need to accelerate the scrapping of older tonnage from the second half of 2016 to see continued recovery in the sector.

In review of the market Bimco analyst Peter Sand said that for 2017 it was “vitally important that shipowners handle the supply side of the market with great care”.

The dry bulk market recovered in the latter part of 2016 from an all time low of the Baltic Dry Index (BDI) of 290 points on 10 February to a high of 1,261 points by mid-November. While this recovery was largely driven by demand for capsize ships from China Bimco flagged concern over the slowing in scapping volumes by owners in the second half of 2016 and the negative impact this could have on the market if it continues into 2017.

“A continuance of the alarmingly low level of demolition activity in the second half of 2016 simply will not deliver the needed zero fleet growth,” said Sand.

With a “significant number” of new ships on order for delivery in 2017 and 2018 some 30m dwt of scrapping annually was required for zero fleet growth.

“This is not a tall order in theory, but the slowdown in scrapping seen since June 2016 causes alarm bells to ring,” he warned.

Bimco expects the supply-side to grow 1.6% in 2017 compared to an estimated 2.2% in 2016.

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