Bank sees ballast water boosting boxship, bulker scrapping

Expensive ballast water equipment could be a significant factor for small containership scrapping. Credit: TechCross
Expensive ballast water equipment could be a significant factor for small containership scrapping. Credit: TechCross

Containerships of less than 2,999 teu will be most susceptible to early scrapping once the Ballast Water Management Convention goes into force next year, according to investment bank JP Morgan.

In an analyst note published 12 December, JP Morgan’s Noah Parquette used the percent of fleets with vessels over 15 and 20 years old by 2021 in the containership, bulker, and tanker sectors to gauge whether scrapping a vessel was likely given the cost of installing a USD1 million ballast water management system (BWMS).

Starting 8 September 2017, shipowners choosing to comply with the convention using a BWMS will have to install it over the next five years, depending on a ship’s next required drydock survey after that date.

Parquette found that 53.7% of containerships of less than 2,999 teu would be older than 15 years by 2021, and the cost of a BWMS as a percent of the value of ships in that capacity range was estimated at 26.7%, both the highest among ship categories.

Handysize bulkers, 28% of which are over 15 years old, stand to be affected by the convention through early scrapping as well, a vessel segment where Parquette estimated the cost of ballast water equipment as a percent of value at 25%.

He pointed out that while the tanker fleet has the highest average age and the highest amount of the fleet turning 15 years old, the cost of ballast water equipment is higher for the dry bulk and container fleets as a percentage of ship values.

“Smaller product tankers could benefit as well, although we believe the incremental scrapping effects on larger, expensive crude tankers will be modest,” according to Parquette.

He noted, however, that “these new regulations should be good for all sectors of shipping by lowering the hurdle for scrapping older ships.”

A tanker research analyst told IHS IHS Markit that because of the five-year span that effectively gives owners time comply the regulation, “the main point to understand is that any impact that scrapping has on vessel capacity will be staggered, it’s not going to be as overnight as people think.”