* Capesize ship scrapping gathers pace
* Dry bulk market struggles with ship glut (Adds further comment, detail)
By Jonathan Saul
LONDON, July 27 (Reuters) - Scrapping of panamax dry bulk vessels is on course to hit an all-time high this year as the sector faces growing pressure from a record number of new ships entering the fleet, ship broker SSY said on Wednesday.
The outlook for dry bulk rates has been grim because ship supply has outpaced demand to ship commodities.
“So far this year we have seen 46 panamax vessels scrapped, which puts panamaxes easily on course for a record year overtaking the 53 which were scrapped in 2009,” said Derek Langston, a senior director at SSY Consultancy and Research.
“These are vessels that we have seen arrive at the breakers and exiting the fleet. These do not include recent sales that we have been aware of in the last month. So that number is clearly set to grow,” he told Reuters.
SSY, one of the world’s biggest ship brokers, said 7 panamaxes were scrapped in 2010. Panamaxes, which range between 60,000 to 99,000 deadweight tonnes (dwt), usually transport cargoes of coal or grains.
“As well as having record demolition activity, we also have record levels of new buildings and the panamax newbuildings are poised to overtake the 186 total we saw in the whole of 2010,” said Langston.
SSY said 152 panamaxes had been delivered so far this year.
Average panamax earnings have hovered below the $13,000 a day level in recent days and reached $12,232 a day on Wednesday, down $54 a day from Tuesday.
Larger capesize vessels, over 100,000 dwt which typically haul cargoes such as iron ore and coal, have also seen record demolitions this year.
Langston said 49 capesizes had been scrapped this year, with 33 in the second quarter alone.
“We have seen more done in one three-month period than any whole year previously,” he said referring to the pace of cape scrapping.
Nevertheless, SSY said 140 capesizes had entered the fleet since the start of the year, with a further 10 ships converted from tankers into capes. That compared with 214 capes delivered last year and a further 17 conversions.
There have been no panamax conversions so far this year, although two tankers were converted in 2010, SSY said.
While U.S. coal exports have been running at the highest levels since the early 1990s and there had been strong growth of minor bulk imports into China, the number of new dry bulkers hitting the water was weighing on the sector, Langston said.
Net fleet growth was forecast to be of a “similar magnitude” to last year, which was around 76.3 million dwt, SSY said.
“Understandably such rapid fleet growth means that several positive developments in seaborne dry bulk trade growth have not prevented a low freight environment,” Langston said.
The Baltic Exchange’s main index has more than halved in the past six months, nearing levels last seen during the economic turmoil in 2008. It reached 1,296 points on Wednesday. (Editing by Anthony Barker)