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Could Navios Partners’ Revenue Fall Due to Scrapping?


Aug. 18 2020, Updated 5:16 a.m. ET

Scrapping activity on an uptrend

Navios Maritime Partners’ (NMM) management noted during its earnings call, which was held on July 30, that its scrapping activity increased in 2015. More than 20.5 million deadweight tonnage (or DWT) of dry bulk capacity was scrapped by July 24, 2015. This constitutes 2.7% of the fleet DWT and is higher than all the scrapping that took place in 2014—16.2 million DWT. The scrapped vessels include 70 Capesizes, compared with 24 Capesizes in all of 2014.

While there is no benchmark of average age for scrapping vessels, according to BIMCO estimates, Capesize vessels with an average age of 21 years were scrapped in 2015, with the youngest vessel scrapped being a 19-year-old Panamax.

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Fleet profile

Navios Maritime Partners LP (NMM) currently has 31 vessels with a deadweight tonnage of 3.3 million. NMM’s dry bulk fleet consists of eight Capesize, 12 Panamax, and three Ultra Handymax vessels. The average age of its dry bulk fleet is 8.1 years, compared with the industry average of 8.8 years. Four of its dry bulk vessels are more than 15 years old.

In comparison, Diana Shipping (DSX) and Safe Bulkers (SB) do not have any vessels more than 15 years old, while DryShips Inc. (DRYS) has six vessels aged 15 years or more in a total dry bulk fleet of 39 vessels. Although some of NMM’s vessels are older than 15 years, there is not an immediate risk of scrapping the vessels, as we discussed above.

NMM forms 2.9% of the Guggenheim Shipping ETF (SEA). Investors can gain general exposure to commodities through the SPDR S&P Metals and Mining ETF (XME). The SPDR S&P 500 Trust ETF (SPY) represents the broader transportation industry

Young container fleet

Currently, Navios Maritime Partners has eight container vessels. The average age of its container vessels is 7.9 years, compared with the average container industry average age of 11 years. No container vessel for NMM is more than nine years old.

While NMM’s relatively young fleet should not weigh down its earnings capacity, the low time charter rates could. In the next part of this series, we’ll explore this topic in detail.


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