Part of the problem, as one can intuit from last week's "Shipping: As Companies Become Insolvent They Sail to American Bankruptcy Courts", is that companies using U.S. Bankruptcy Courts are opting for Ch. 11 reorganization rather than Ch. 7 liquidation. This means that these ships just keep sailing, with no reduction in the worldwide fleet.
From the Telegraph:
The downturn in shipping is hitting the industry so hard that some of the world's biggest vessels are now worth little more than their scrap value, new figures show.
Shipyards have been turning out new vessels at a pace designed to service global demand that has simply failed to materialise, meaning the industry is now sinking under massive overcapacity.
As owners have seen the rates charged to carry freight plunge, demand for their ships has collapsed to the point that selling them for scrap makes financial sense much earlier in a vessel's life.
In the worst hit sectors, the fall in the ships's value and the rise in the price of steel – driven by rapacious demand from China as it builds itself anew – means that the difference between the prices fetched if vessels are sold on to keep sailing and those if they are broken up for scrap is now minimal.
Cargo ships as a general rule are built to sail for 25 years, yet in the volatile VLCC or "very-large crude carrier" sector, which comprises the world's biggest oil tankers, scrap and resale prices reached parity in recent months for the average 15-year-old ship, according to prices tracked by industry information provider VesselsValue.com.
A typical 15-year-old VLCC achieved an average resale price of about $78m (£49m) at the peak of the market in July 2008, its research shows. That figure has since plunged to $23m....MORE