Drewry: IMO’s BWM Regulation to Boost Tanker Scrapping Activity

Weakness in freight rates will increase tanker shipping demolitions over the next two years, with the trend accelerating in later years as a result of the IMO regulation on ballast water, according to shipping consultancy Drewry.

The new International Maritime Organisation (IMO) regulation on Ballast Water Management will require that all vessels going into deep sea have in-built Ballast Water Treatment Systems (BWTS) by September 2017.

Existing vessels will have a grace period to carry out the retro-fit during their next special survey if this occurs after the deadline. Some owners are expected to bring forward fourth special surveys, if they fall around the scheduled deadline, in order to delay retrofitting BWTS to the fifth special survey.

But vessel owners for which the survey is due after mid-2018 will probably have to either retro-fit BWTS or scrap their tonnage. The additional cost of retrofitting BWTS along with the special survey will force many owners to scrap younger vessels before the next survey is due, Drewry said.

The shipping consultancy estimates that about 74 crude tankers with 14 million dwt and 114 product tankers with 5.6 million dwt will have their fourth special survey due between mid-2018 and 2021, making them potential victims of the new regulation.

“We do not expect all these vessels to be scrapped since many of them are on long-term charter at attractive rates, justifying the additional cost of retro-fitting BWTS,” Rajesh Verma, Drewry’s lead analyst for tanker shipping, said.

“However, since the tanker market will be oversupplied, older vessels will find it difficult to get employment, which in turn will force many owners to scrap their tonnage just before their next survey is due,” Verma added.