Ship Recycling Heats Up in Asia as Turkey Remains Cold
The ship recycling industry is showing signs of life in the Indian subcontinent as summer approaches, according to ship cash buyer GMS. However, the picture is far from uniform across regions.
As the summer and monsoon months approach, ship recycling markets in Turkey and the Indian sub-continent have shown signs of strengthening in recent weeks, according to reports from cash buyer GMS.
In Pakistan, the market, though relatively stable, has been sluggish. The country has processed a significant number of vessels, but the outlook remains gloomy. Despite surpassing last year’s recycling volumes with three new arrivals this week, Pakistan’s market is currently the weakest among sub-continent destinations. Several factors contribute to this situation: a persistent shortage of workable tonnage, increased competition from neighbouring countries, and the persistent issue of dwindling U.S. Dollar reserves. This financial strain is causing significant challenges for the market.
Bangladesh has been particularly affected by the shortage of U.S. Dollar reserves over the past year. Recent economic changes have exacerbated this issue, with a drastic devaluation of the Bangladeshi Taka causing concern among industry players. Recyclers in Gadani are hesitant to make offers on available units due to potential incoming restrictions on Letters of Credit (L/Cs), fearing further price declines in the coming weeks. This uncertainty has led to newly concluded deals being reconsidered almost immediately after being made.
As the industry prepares for summer, the announcement of Bangladesh’s budget for the fiscal year 2024-2025, scheduled for early June, is expected to signal another decline through June and early July.
India’s ship recycling market has been on an upward trend recently. Recyclers in Alang are eager to take over from their counterparts in Chattogram, driven by steady improvements in steel prices. This momentum is fueled by the conclusion of general elections in the country, which has added a sense of urgency to their acquisitions. Alang recyclers have been making notable purchases, including specialized units and rare HKC recycling sales.
Pakistan Stumbles Despite Gains: While Pakistan has exceeded its ship recycling volumes from last year with new arrivals this week, its market outlook remains weak. This is due to several factors:
- Limited availability of suitable ships: There just aren’t enough good quality ships available for scrapping in Pakistan.
- Competition from neighbors: Increased demand from nearby countries like India is driving up prices for the few available ships, making it harder for Pakistani recyclers to compete.
- Dollar shortage woes: Pakistan is facing a growing shortage of US dollars, which is impacting the recycling industry. This is a recurring issue, and recent economic developments suggest it might worsen.
Bangladesh Braces for Uncertainty: Similar to Pakistan, a lack of US dollars is causing problems in Bangladesh. The recent devaluation of the Bangladeshi currency has made recyclers hesitant to buy ships. They fear that potential restrictions on accessing dollars could lead to further price drops in the future, making recently signed deals unprofitable. Adding to the uncertainty, Bangladesh’s upcoming budget announcement in June is casting a shadow over the market, with predictions of a decline in activity through the summer.
India Steps Up: In contrast to Pakistan and Bangladesh, India’s ship recycling industry is experiencing a positive trend. Recyclers in Alang are actively buying ships, taking advantage of rising steel prices that have been boosted by the recently concluded general elections.
Turkey Remains a Mystery: The situation in Turkey is puzzling. Unlike the active markets in Asia, the Turkish ship recycling industry appears completely stagnant. There have been no reports of changes in market conditions, local purchases, or even ship arrivals in Aliaga, the country’s main recycling centre. This raises questions about how Turkish recyclers are managing to keep their businesses afloat.
In a Nutshell:
- The ship recycling market in the Indian subcontinent is showing signs of improvement, driven by rising steel prices and increased demand.
- Pakistan and Bangladesh face challenges due to a lack of suitable ships, competition, and currency issues.
- India is experiencing a positive trend in the industry.
- Turkey’s ship recycling industry remains a mystery, with no apparent activity.
