Ship Recycling Market: Boom Expected in India Despite Short-Term Downturn
The ship recycling industry is experiencing a mixed bag of situations across different regions, according to reports from leading cash buyer Best Oasis and shipbroker Banchero Costa.
Current Market Conditions:
- India: The Indian market is facing a temporary downturn due to lower demand for ship steel scrap. This is likely because cheaper alternatives are available. However, a rebound is expected after the Eid festival, as has been the historical trend.
- Bangladesh: Recycling activities in Bangladesh are expected to slow down due to a slight decrease in local steel prices and Eid celebrations. The market is likely to remain sluggish until early July.
- Pakistan: The Pakistani market is adjusting to recent policy changes that removed tax benefits for the industry. Stakeholders are evaluating the long-term impact of these changes.
- Turkiye: Similar to India, Turkiye is experiencing a slowdown due to an upcoming holiday week that will dampen industrial activity.
Positive Outlook for India:
Despite the short-term downturn, India’s ship recycling industry is projected for significant growth. Here’s why:
- Increased Supply of Ships: Global ship capacity expansion is leading to more ageing vessels being decommissioned for recycling.
- India’s Competitive Edge: Indian recyclers are efficient and offer a cost advantage compared to competitors like Bangladesh and Pakistan.
- Rising Demand: Lower freight rates will make it less economical to operate older ships, further increasing demand for ship recycling.
Growth Projections:
- 15% Revenue Growth: Indian ship recycling is expected to achieve a 15% revenue increase this fiscal year, bouncing back from a two-year decline.
- 20-23% Volume Increase: Indian recyclers are expected to see a significant rise (20-23%) in the volume of ships recycled.
- Strong Financial Performance: Stable cash flows and healthy credit profiles are expected for Indian recyclers due to their operational and financial strength.
India’s Broader Economic Strength:
India’s economic outlook is also positive:
- Fastest-Growing Economy: India is forecast to remain the fastest-growing economy in the Asia-Pacific region for 2024, driven by strong domestic factors.
- Surpassing Pre-COVID Growth: The country’s first-half performance indicates a growth trajectory that is expected to exceed pre-pandemic levels.
- Factors Driving Growth: Increased exports, robust local demand, and high government spending on infrastructure are fueling India’s economic rise.
Recent Deals and Trends:
The report from Banchero Costa highlights some interesting recent deals:
- Firm Prices Despite Volatility: Despite fluctuations in local steel plate prices and currencies, some ship sales achieved strong prices. An example is the container vessel ‘MSC TIA II’ which sold for a firm price of USD 570/LT for recycling.
- Focus on Older Tankers: There’s an increased interest in acquiring older tanker tonnage, particularly those with complex trading history, for demolition on private terms.
Conclusion:
The ship recycling market is experiencing short-term fluctuations in different regions. However, India’s outlook is positive due to its competitive edge, rising demand for ship recycling, and the country’s overall economic strength. While the Eid holidays may cause a temporary slowdown, the long-term forecast for India’s ship recycling industry is bright.
