Page 73: of Maritime Reporter Magazine (November 1996)

SCRAPPING FORECAST

Scrapping Report Forecasts Lower Payouts For Shipowners

A crisis is looming in one of the few areas of the shipping market where there has been a degree of certainty. The shipping communi- ty has never really perceived the disposal of obsolete tonnage to be a physical problem and consequently has always felt able to assume that there will be a shipbreaking indus- try which not only can cope with whatever vessel tonnage it is offered, but also provide the own- ers with a residual value.

Shipowners can no longer take these prospects for granted.

The first serious warning signs have been seen recently with

Indian breakers pulling out of agreed vessel purchases and forc- ing new deals at prices as much as 20 percent lower. The trigger was domestic economic moves within

India, affecting the price of steel and increasing fuel costs. This brings into focus the idea that the shipbreaking industry operates on very slim financial margins, which is compounded by the politically and environmentally sensitive nature of scrapping operations.

Finding A Market

Ferrous scrap has two primary end-users — electric arc furnace (EAF) route steelmakers and re- rolling mills. EAF mills are now highly selective in the constitution of their scrap charge, making the use of ship plate largely obsolete.

Demand for re-roll material focus- es mainly on the production of reinforcing bars (rebars), set in concrete for use in the construction industry. The rebar industry is highly competitive, with scrap ship-derived product not offering a substantial advantage over rebars made from new steel. In addition, several countries, including China, have introduced regulations ban- ning the use of scrap-derived rebars in the construction indus- try. Drewy notes that scrap is vir- tually irrelevant to the determina- tion of prices in the ferrous scrap marketplace and consequently, shipbreakers have virtually no "upside" on the prices they can offer shipowners. An aging fleet, particularly in large vessel cate- gories, is increasing the demands on breakers, who are in turn see- ing their own markets diminish.

Shipowners can therefore expect the prices paid to them by breakers to drop. Drewry notes that as shipbreaking becomes an increas- ingly unviable economic activity in

China and the Indian subconti- nent, where labor rates are low, the medium-term future of shipbreak- ing is uncertain. The reports sug- gests that there may be a return to the higher technology, berth-based operations that were used in the 1980s, rather than the unsophisti- cated beach operations which are the modern norm.

The preceding was excerpted from

Drewry Shipping Consultants' abstract to its latest report, Ship Scrapping:

Locations, Activity, Price Trends and

Problems. For information regarding obtaining the report, call +44 171 538 0191.

Jurong Shipyard Opens New 500,000-dwt Dock

Jurong Shipyard's largest and latest ULCC drydock and its ancillary supporting facilities are now fully operational. Measuring 1,246 x 263 x 46 ft. (380 x 80.2 x 14 m), this largest dry- dock in Singapore is designed to dock the new generation of double-hulled tankers of up to 500,000 dwt, as well as large offshore drilling and production platforms.

Seay Corp. Renews MSC Contract

Seay Corp. announced the renewal by

Military Sealift Command of its fuel delivery contract in Japan and Korea with North Pacific

Expediting, an Alaska Native Corporation. The tug Chilkat Hunter and barge Chilkat Warrior will continue providing their service to U.S. military basis in these two countries.

Western Geophysical Offers New

Seismic Streamer Technology

Western Geophysical announced a new pro- prietary technology for seismic streamers that it claims will significantly increase the efficien- cy and productivity of marine surveys. Seismic sensors have been incorporate into new streamers made of a solid, flexible material, which the company touts as an improvement over current oil-filled plastic cables. This tech- nology was developed jointly with Thomson

Marconi Sonar Pty. Ltd., Sydney, Australia.

According to its developers, it will reduce the lifecycle cost for streamers and improve acqui- sition efficiencies during seismic surveys. "Marine streamers are the costliest and most critical components aboard modern seismic vessels, and they have a direct impact on sur- vey efficiencies," said Richard C. White, senior vice president of Western Atlas and pres- ident of Houston-based Western Geophysical.

Chevron Participates In Expansion Of

Natural Gas Project Offshore Australia

Chevron, as a member of the North West Shelf

Project in Australia, announced a significant step towards a major, $5-billion expansion of the world-class liquefied natural gas (LNG) pro- ject. A formal proposal was submitted in Osaka to the eight Japanese power and gas utility cus- tomers who purchase LNG, outlining a plan for a two-train LNG expansion, almost doubling the project's existing sales capacity of 7.5 mil- lion tons per year. Subject to the requirements of the Japanese customers, the seven-million- ton expansion could be on stream as early as 2003. The expansion would include new off- shore production facilities and LNG shipping.

Total cost of the expansion is expected to approximate $5 billion. The expansion project also allows for growth in domestic gas sales and for the extension of existing contracts. The pro- posal responds to indications of interest by the

Japanese customers to purchase additional

LNG from the North West Shelf Project. The project has an excellent reputation for provid- ing its customers with a stable and reliable sup- ply of Australian LNG. "Over the past decade, we have established and enhanced a close rela- tionship with the Japanese utilities, and we look forward to many more decades of success- ful business together," said John Gass, man- aging director of Chevron Asiatic, the unit of

Chevron responsible for its activities in

Australia.

Intertanko Publishes Port Costs Guide

Intertanko has published the 1996 edition of

Disbursements for Tankers, an industry guide to port costs worldwide. The 110-page book reportedly lists approximately 2,700 disburse- ments, comprising actual figures and recent cost estimates, provided by port agents in 430 tanker ports and terminals.

For more information from Intertanko

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WORLDWIDE SERVICE ^ CHECK US OUT

Tele: (407) 750-6646 • Fax: (407) 750-6648

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November, 1996 75