OREANDA-NEWS. Scrapping levels for dry bulk vessels have fallen significantly in the second half of 2015, market sources said, leading to an expansion in the size of the dry bulk fleet that is likely to put further pressure on freight rates.

Recent data from Allied Shipbroking show that around 354 vessels, a total of 26.2mn dead weight tonnes (dwt), have been sold for scrap so far this year, compared with 15.5mn dwt in 2014.

But the number of vessels scrapped has steadily declined from nearly 140 units in January to less than 50 in October.

Norwegian bank Arctic Securities estimates that of around 25.4mn dwt of dry bulk tonnage sent for scrapping this year, 20.2mn dwt of this took place in the first half.

Total scrapping levels could therefore come in below 30mn dwt for the year. This compares with around 43mn dwt of new tonnage that is expected to enter the market.

This indicates a significant expansion in the global dry freight fleet, despite freight rates already hovering around historic lows on the back of weakening global demand for coal and iron ore, and an oversupply of vessels.

Arctic Securities concluded that scrapping rates will have to expand significantly to resolve the supply-demand imbalance and enable freight rates to rise.

Demolition rates have fallen on the back of falling vessel scrapping prices because of an oversupply of cheap steel, a lack of credit and the weakening Indian Rupee against the dollar, suggesting that the issue is likely to persist.