Ship Recycling: The industry is facing multiple headwinds: STAR ASIA
The ship recycling markets across the Indian subcontinent remained subdued this week, struggling with a confluence of challenges. Weak domestic steel demand and liquidity constraints, particularly in Bangladesh and Pakistan, have weighed heavily on the sector. Compounding these issues, domestic ship scrap price corrections have further dampened market sentiment.
The week offered a preview of potential opportunities on the supply front, with a few VLCCs entering the market. However, buyer interest remained tepid, reflecting the broader caution among recyclers. Despite the availability of these high-tonnage assets, end buyers with purchasing power have refrained from aggressive bidding, citing lingering concerns over market uncertainties. Notably, Aframax tankers have commanded prices approximately USD 20–25/ton higher than VLCCs, underscoring the selective appetite in a risk-averse environment.
A gleam of optimism arises from declining freight rates, particularly in the dry bulk segment, along with some changes in the container segment, which has been elevated for a very long period. This downturn may drive more vessels toward recycling.
The first quarter of the upcoming year is anticipated to see a notable uptick in supply, which could rejuvenate activity in the recycling sector.
Alang, India
The ship recycling industry is facing multiple headwinds this week, with a shift towards cautious negativity among stakeholders amid cheaply available imported ferrous scrap, sluggish domestic steel sales and the strengthening US Dollar Index.
These factors combined contributed to uncertainties in the industry’s outlook, potentially affecting pricing and the volume of recycling activity in the near term.
However, on the brighter side, India’s steel ministry is advocating for a temporary safeguard duty to curb a surge in cheap Chinese steel imports, a senior official revealed. The proposed tariff aims to protect domestic steelmakers, including JSW Steel, Tata Steel, and ArcelorMittal Nippon Steel India, as imports hit a seven-year high during April- August.
India, the world’s second-largest crude steel producer, became a net importer in FY24 amid rising demand fueled by infrastructure spending. The government has resisted curbing imports to ensure supply but now sees the need to prevent price crashes and financial strain on local producers.
Free trade pacts with Japan and South Korea limit import duty options, while anti- dumping probes are too time-consuming. The safeguard duty process is expected to begin soon, with implementation likely within six months. Additionally, India plans to tighten quality standards to deter Chinese imports but has declined requests to restrict low-grade iron ore exports, citing sufficient reserves.
On the other hand, for the ferrous scrap importers, India Faces a Regulatory Shift in EU Scrap Imports: A Game Changer as well for the Ship Recycling industry.
India’s ferrous scrap import landscape is set to transform following the EU’s revised Waste Shipment Regulation (WSR), which came into effect in May. By February 21, 2025, India must request approval from the European Commission to continue importing EU-origin waste, including steel scrap. Missing this deadline would halt exports by May 2027; with EU ferrous scrap accounting for 55% of the 35 million tons of exported waste in 2023, India’s 3.7 million tons of imports underscores its dependence on these materials, driven by an 8-9% industrial growth forecast.
Industry experts stress the need for compliance with EU-aligned waste management standards, proactive audits, and strategic partnerships. Timely action is critical to ensuring uninterrupted access to EU materials and sustaining India’s industrial expansion, but if India misses this looming deadline, the ship recycling industry expects a sharp rise in ship recycling prices.
Chattogram, Bangladesh
This week witnessed a sharp downturn in market sentiment across the ship recycling sector, leading to a notable decline in ship prices. The sudden drop in demand has weighed heavily on the market, while domestic ship scrap prices have also turned negative, driven by sluggish sales in local steel markets.
Adding to the challenges, political instability in Bangladesh has exacerbated uncertainties. Following the collapse of the Sheikh Hasina government, the interim administration has struggled to provide stability or clarity for the business environment. Industry experts predict that the ship recycling market in Bangladesh will remain subdued until a permanent government is established and policy direction is clarified.
The combined effects of weak demand, falling scrap prices, and political turmoil have created a cautious atmosphere among recyclers in the Indian subcontinent. Many buyers are refraining from making significant commitments, preferring to wait for clearer signals on both domestic and global fronts.
Looking forward, the market’s recovery will likely depend on improvements in local steel demand and the stabilisation of the political landscape in key markets like Bangladesh. Until then, recyclers are expected to maintain a conservative approach, with limited activity and downward pressure on pricing persisting in the short term.
Gadani, Pakistan
The ship recycling market has entered a phase of near-hibernation as the availability of end-of-life vessels dwindles to historically low levels. Compounding the inactivity, demand for ship scrap remains lacklustre, creating a double blow for an already subdued sector.
The liquidity crunch has further shifted the focus toward need-based purchasing of imported ferrous scrap rather than speculative or opportunistic buying. This constrained approach reflects broader economic uncertainties and muted construction and manufacturing activity, traditionally strong drivers of scrap demand.
Despite the current stagnation, industry players remain cautiously optimistic that the market may revive as macroeconomic conditions stabilise and as more ships are lined up for recycling due to a drastic fall in the freight rates, especially in the dry bulk segment.
Aliaga, Turkey
Turkish steel market dynamics showed mixed signals this week, with some domestic mills reducing their buying prices while imported scrap prices recovered following fresh US deals. Market participants express cautious optimism, noting that while there has been a
rebound, sustained price increases will depend more on Turkey’s domestic and export market fundamentals than on Chinese stimulus measures.
Industry observers point out that Turkey is not facing immediate supply constraints for January-shipment scrap purchases, with shipbreaking scrap prices remaining stable at US$340-355/ton delivered, and the Turkish currency closing at TRY 34.94 to the dollar.
Sub-Continent and Turkey ferrous scrap markets insight
The Indian Sub-Continent ferrous scrap markets faced continued challenges this week, with weak domestic steel demand, liquidity pressures, and global factors influencing trading activity. Prices for UK-origin shredded scrap rose in Pakistan and Bangladesh but remained steady in India, while US-origin HMS (80:20) bulk prices in Turkey held firm.
Indian buyers took a measured approach, expecting further price drops due to slow domestic steel sales and tight liquidity. Major steel mills reduced December price lists in response to weak market conditions. UK-origin shredded scrap was steady at US$380/ton CFR Nhava Sheva, with offers ranging between US$380-385/ton CFR. HMS (80:20) from West Africa was quoted at US$360-370/ton CFR, depending on loading volumes.
A local steel mill official noted limited market activity, attributing it to minimal finished steel sales and holiday slowdowns in the US and UK markets. Despite expectations of price corrections, some industry players believe safeguard measures for steel could help stabilise sentiment.
Pakistani buyers continued to focus on need-based purchases as seasonal factors and liquidity issues dampened demand. UK-origin shredded prices rose by US$4/ton to US$387/ton CFR Qasim, with offers between US$385-390/ton CFR.
Local scrap prices remained stable at PKR 142,000/ton, while rebar was priced between PKR 245,000-250,000/ton. A trader highlighted limited inquiries despite some improvement in global sentiment. Imported shredded was sold at US$390/ton, while local billet and rebar prices were quoted at PKR 206,000-210,000/t and PKR 240,000/ton, respectively.
The Bangladeshi scrap market saw minimal trade activity, with financial pressures weighing on mills. UK-origin shredded scrap rose by US$4/ton to US$388/ton CFR Chattogram, while offers for containerised shredded from the UK/Europe were at US$390/ton CFR. HMS ranged between US$375-380/ton CFR.
Mills operated at losses to maintain liquidity, with rebar prices in Dhaka at BDT 77,000- 79,000/ton (US$644- US$661) and in Chattogram at BDT 81,000-82,000/ton (US$678- US$686). Billet prices hovered around BDT 63,000/t (US$527), while local scrap was priced at BDT 48,500-50,000/t (US$406- US$418).
Turkey’s ferrous scrap market held steady following a recent price hike. US-origin HMS (80:20) bulk was stable at US$345/ton CFR, with Baltic-origin material trading at US$340- 345/ton CFR.
Robust rebar sales spurred mills to restock ahead of anticipated market shifts. Rising collection costs and holiday-season constraints among Baltic recyclers supported firm price levels. Sentiment remained optimistic, with potential developments from China’s economic policy likely to influence the market.
Sub-continent ferrous scrap markets remain under pressure, with liquidity constraints and low steel demand dictating cautious buying behaviour. Turkey’s market shows signs of resilience, driven by strong rebar sales and tight supply. Global developments, including China’s economic signals, could shape market trends in the coming weeks.
