The World’s Largest Buyer of Ships and Offshore Assets Evan S… · 1 Tankers, Bulkers and...

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Tankers, Bulkers and Containers: Recycling Prices, Volumes and Regulations

9th Annual Marine Money London Ship Finance Forum, 24 January 2018

Evan F. Sproviero, Head of Projects, GMS

The World’s Largest Buyer of Ships and Offshore Assets

2www.gmsinc.net Tankers, Bulkers and Containers: Recycling Prices, Volumes and Regulations

A. Recycling Prices and Residual Values

B. Volumes Recycled

C. Regulations Affecting the Market

3www.gmsinc.net

Items to Consider:

1. Why has understanding Residual Values become important to Shipowners and Capital Providers?

2. Residual Values = Recycling Value?

3. How can we calculate Residual Values?

4. When should we start thinking of Residual Values?

5. Is their a way to monetize Residual Values TODAY?


4www.gmsinc.net

Recent trends in the past few years and the growing importance of

residual values:

1. Shorter Life Expectancy of Ships

2. Poor Freight Rates

3. Oversupply of Vessels

4. Lack of Debt Financing

Consequently,

A. Shortage of trading buyersB. Catastrophic drop in asset values (often recycling prices are equal to or at

times greater than 2nd hand prices)


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30.628.58

24.0625.29

23.75

29.32

22.17

18.6120.73

0

5

10

15

20

25

30

35

2015 2016 2017

Average age for Recycling

Tanker Dry Bulk Container

Data Source: Clarksons Database


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0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

10000

20000

30000

40000

50000

60000

70000

80000

01/01/16 01/03/16 01/05/16 01/07/16 01/09/16 01/11/16 01/01/17 01/03/17 01/05/17 01/07/17 01/09/17 01/11/17

2016-2017 Earnings

Average VLCC c. 2010-built Earnings Average Aframax c. 2010-built Earnings

Average Capesize c. 2010-built Earnings Clarksons Average Containership Earnings



10727 10876 11113

5171 5089 5071

2477 2617 2740

0

2000

4000

6000

8000

10000

12000

2016-Jan 2017-Jan 2018-jan

Current Fleet

Bulk Carrier Containerships Tankers

Percentage Change – Tankers : 5.6% for 2017 and 4.7% for 2018

8.779.70

10.62

8.75

10.00

11.05

9.08

10.30

11.51

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Bulk Carriers Tankers Containerships

Average Age

2016-Jan 2017-Jan 2018-Jan

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The Hammonia Grenada (built 2010) wassold for recycling at an estimated $5.5mearlier in 2017. More than 12 vessels (8 ofthem are containerships) built after 2004were been sold for recycling in 2017.



1. Supply & Demand1. Supply is affected largely by earnings2. Demand is heavily influenced by many factors including steel prices and supply of vessels for

sale in the market

2. Prices of Commodities1. Domestic steel prices (recycling, ship plate)2. International Finished steel (rebar, billets, etc)

3. Currency exchange rates

4. International and Domestic Regulations

5. Recycling & Trading Opportunities1. Vessel condition [recycling (own power/under tow), or some trading potential]2. Freight rate

6. Speculation

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Source: Lloyd’s List

Speculation at high levels!


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-0.15

-0.1

-0.05

0

0.05

0.1

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

05-0

1-15

05-0

2-15

05-0

3-15

05-0

4-15

05-0

5-15

05-0

6-15

05-0

7-15

05-0

8-15

05-0

9-15

05-1

0-15

05-1

1-15

05-1

2-15

05-0

1-16

05-0

2-16

05-0

3-16

05-0

4-16

05-0

5-16

05-0

6-16

05-0

7-16

05-0

8-16

05-0

9-16

05-1

0-16

05-1

1-16

05-1

2-16

05-0

1-17

05-0

2-17

05-0

3-17

05-0

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05-0

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6-17

05-0

7-17

05-0

8-17

05-0

9-17

05-1

0-17

05-1

1-17

05-1

2-17

BDA B/C SUBCON

BDA B/C SUBCON Percentage Change Data Source: Baltic Exchange


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- VesselsValue valued RMT’s entire fleet (14 with an average age of 9.5 years ) at $89m,

- Today’s recycling price more than USD 115M (approx.)

- 6 well maintained Panamaxes built between 2009 and 2011 at a total cost of $60-65m

- Today’s recycling price = USD 54M (approx.)

Volatility in Residual Values presents significant risks and opportunities


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• Kohyohsan, built 2001, Capesize

bulker carrier, was sold at approx.

$ 5.2m for further

trading on 16th Feb 2016.

Source: Seaweb, Clarkson’s Database


5.2 5.3

9.6

12.8

0

2

4

6

8

10

12

14

Sale Done on Feb 2016 Scrap Value on Feb 2016 Scrap Value Today(Estimated)

FMV Today

Value of KOHYOHSAN (in million USD)


Current Demo Prices ($ per LT)

Tankers: $450/ Long Ton

VLCC= $19mn+/-

Containers: $460/ Long Ton

Pmax= $9.2mn+/-

Bulkers: $440/ Long Ton

Cape= $10mn+/-

17www.gmsinc.net


Dry Bulk Container Tanker Offshore

New Building

28m DWT(375 VSLS)

654,411 TEU(194 VSLS)

1.6m DWT(54 VSLS)

2.9m DWT(193 VSLS)

33.3m DWT(429 VSLS)

904,805 TEU(131 VSLS)

47.23m DWT(564 VSLS)

2.7m DWT(304VSLS)



1,147,240 TEU(148 VSLS)

397,900 TEU(141 VSLS)

686k DWT(156VSLS)



2.06m DWT(128 VSLS)

2016 2017 2016 2017 2016 2017 2016 2017


2018 - Expectation

13m DWT

2018 - Expectation 2018 - Expectation 2018 - Expectation

300,000 TEU 16m DWT 2m DWT

2016 2017 2016 2017 2016 2017 2016 2017



20

3

36

21

6

30

13 13

3435

0

5

10

15

20

25

30

35

40

VLCC Suezmax Aframax Handysize

Tanker Recycling in Number of Vessels

2015 2016 2017

539,977

0

288,268

924,044578,671

149,849

636,191

1,067,677

3,880,707

1,949,124

3,518,613

1,291,690

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

VLCC Suezmax Recycling Aframax Recycling Handysize Recycling

Tanker Recycling in DWT

2015 2016 2017

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Source: TradeWinds

Tankers sent for recycling have reached a three year high on the back of a combination of low freight rates and high demo prices.

Over the last 12 months, the recycling value of an average VLCC had risen by 40%, from $12m ($300/ldt) to $16.8m ($420/ldt).

However, it still pales in comparison to delivery volumes.

More tankers need to be recycled.


20www.gmsinc.net

Capesize Panamax Handymax Handysize2015 15,438,232 6,874,056 3,144,582 5,221,8152016 13,335,427 8,353,430 4,311,759 3,247,2372017 6,376,585 3,529,530 3,043,161 1,578,132

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

Bulker Recycling in DWT

2015 2016 2017

Capesize Panamax Handymax Handysize2015 93 96 71 1712016 78 116 96 1182017 33 49 66 67

0

20

40

60

80

100

120

140

160

180

Bulker Recycling in Number of Vessels

2015 2016 2017



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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2015 2016 2017

2015 2016 2017Feeder 100-2,999 TEU TEU 91,606 162,787 119,361Intermediate 3,000-5,999 TEU TEU 101,647 427,525 259,458Intermediate 6,000-7,999 TEU TEU 0 64,078 19,084Neo/Post-Panamax 8,000+ TEU TEU 0 0 0

Containership Recycling in TEU

Feeder 100-2,999 TEU TEU Intermediate 3,000-5,999 TEU TEU

Intermediate 6,000-7,999 TEU TEU Neo/Post-Panamax 8,000+ TEU TEU

0

10

20

30

40

50

60

70

80

90

100

2015 2016 2017

2015 2016 2017Feeder 100-2,999 TEU 67 89 81Intermediate 3,000-5,999 TEU 25 95 57Intermediate 6,000-7,999 TEU 0 10 3Neo/Post-Panamax 8,000+ TEU 0 0 0

Containership Recycling in Number of Vessels

Feeder 100-2,999 TEU Intermediate 3,000-5,999 TEU

Intermediate 6,000-7,999 TEU Neo/Post-Panamax 8,000+ TEU




61 65 65 66 63123 69 49 87 68

127 83154 186

94 136211 183 183 203 220 171

2

260 308 351 333280

288311

273110

5154 90

162

403

364

423

499

350 303 212

351

229

11

1614

40 3319

2712

25

12

57 20

16

87

78

80

106

9797

98

126

96

1

137

49 7288

8196 131

49

1611 14

33

221

136

197

272

309

209

163

114

120

0

9193

112 12093

81 107 96

57

5070 71

71

251

267

302

303

226

193

133

139

180

60

200

400

600

800

1,000

1,200

1,400

1,600

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Recycling by Country – Number of Units

Bangladesh India Pakistan PRC Other

24www.gmsinc.net

• Ballast Water / Emissions

• EU Waste shipment Regulation• EU flag ships to be recycled in EU approved facilities• If a ship, regardless of flag, departs an EU port for recycling, it is obliged to be recycled in an OECD

based yard with BASEL to apply• Indian yards have applied to EU for approval.

• Hong Kong Convention• Certified yards• SOC yards• IHM, SRP, FMP, Auditing and Reporting• 57 yards in Alang are SOC with HKC certified, and 9 are in progress (updated on 12 Jan, 2018) • More than 55% of the recycling yards in Alang are already or working towards SOC with HKC.• In October, 2017, the PHP shipbreaking yard received a Statement of Compliance under the Hong

Kong Convention for the Safe and Environmentally Sound Recycling of Ships from the classification society RINA.


Old vessels for which, upgrade is not cost-effective, will be recycled

26www.gmsinc.net

1. Residual Values (recycling related) have become important to Shipowners and Capital Providers2. Residual Values often equal Recycling Values with few exceptions

3. Given the markets over the last few years, residual value / recycling pricing should be considered from newbuilding delivery 4. Recycling Volumes are high but there is capacity to expand / recycle

more tonnage (NB deliveries still far outpacing recycling) 5. Regulations will play an even larger role in the future of recycling but it

is important for owners to properly understand the facts about the recycling market and efforts being undertaken to offer RSR options

6. Is there a way to monetize Residual Values TODAY?1. Yes. Please contact us or visit our website: http://gmsinc.net/ or download our app from

the App store / Google Play


http://gmsinc.net/


Established in USA in 1992. Largest Buyer of Vessels & Offshore Assets!

In last few years, principals of GMS have delivered about 1/3 of the world’s fleet sold for recycling (excluding Chinese subsidized tonnage).World's FIRST ISO 9001:2000 certified Buyer.

GMS has negotiated (about):• 3,300 ships and Offshore Assets; • 100,000,000 DWT;• 300 vessels/offshore assets in a single year (2012)• One of the BIGGEST deals in the history of recycling

With multiple offices across the world including: U.S.A., Germany, Greece , U.A.E., Singapore, China, Korea, Japan and exclusive rep offices in India, Bangladesh, Pakistan and Turkey. This allows us to deliver 24/7 local service to global shipping clients.

Financial and Management capability to:• Buy fleets on simple CASH "as is where is“ terms. • Take forward positions• Structure Deals

The World’s Largest Buyer of Ships and Offshore Assets Evan S… · 1 Tankers, Bulkers and...

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