ANALYSIS of the dry bulk carrier values undertaken by consultancy Zuoz Industrial, and commissioned by the Baltic Exchange, looks at the potential impact of longer-term higher ship recycling values on five year old tonnage.
With recycled steel an increasingly popular choice, thanks to its lower carbon footprint when compared with virgin steel, the paper discusses whether higher steel recycle values are a longer-term trend. Although down 20% since its April 2022 high, the price of lightweight steel is about $520/ldt and more than double the historic average since 2009.
“Should the current multi-year higher cycle value turn out to be a fundamental risk trend supported by some of the evolving demand factors, the fundamental risk of investing middle aged dry bulk tonnage, particularly in softer freight markets, will have decreased,” report author Urs Dür said.
The Baltic Exchange publishes a set of investor indices for the major dry bulk sectors which includes the Baltic Residual Risk Index, a ratio of the residual value of the vessel against its recycling value, and the Baltic Residual Value Index, which calculates the value by taking the written down cost of a five-year-old vessel by fixing the earnings on the basis of a five year timecharter and adding back the operating costs.
