The ship recycling industry, a vital component of the maritime sector, is currently facing a series of challenges that have cast a shadow over its usual vigor. In recent weeks, the market has experienced a slowdown primarily due to a drop in supply. The Indian recycling market, a key player in the industry, has been particularly affected. The domestic steel prices in India have been steadily declining, causing a ripple effect on recyclers. Price indications from this destination have decreased by approximately USD 20-30 per light displacement tonnage (ldt). This trend has left recyclers in a somber state, and they are anticipated to remain subdued until after the Diwali festivities on 12th November.
Additionally, Bangladesh, another significant market in the Indian Sub-continent, is grappling with poor local demand. Reports from the Chattogram anchorage illustrate a diminishing number of vessels arriving for recycling. The market here is plagued by a lack of confidence in general business, partly due to the upcoming national elections, and an ongoing shortfall of currency reserves, which hampers the process of opening Letters of Credit (LCs).
Allied, a prominent player in the industry, noted a softer trend in the ship recycling market. This trend, characterized by weakening prices throughout October, has even affected Alang, where prices are rapidly reversing their recent gains. The local steel market’s volatility has made Indian recyclers more cautious, exacerbated by pressure from Chinese steel exports. Despite these challenges, specific vessels, like the bulker ‘One Destiny,’ have been sold to Indian breakers, albeit at significantly reduced prices.
The market’s direction in the coming months remains uncertain. As long as the supply of vessels remains limited, a drastic decline in prices could potentially be averted. Recyclers are hopeful that corrections in markets, such as Capesize, or an oversupply of boxships might divert more vessels toward their shores, sustaining their businesses.
In a parallel development, GMS, a leading global cash buyer of ships, reported a decline in ship recycling markets globally. India, being a market leader, has experienced a notable drop of approximately USD 20 per ldt in vessel prices. Meanwhile, Bangladesh and Pakistan are struggling to secure the necessary financing for workable Letters of Credit (L/Cs). Despite these challenges, a shortage of viable candidates has inadvertently prevented a further degradation of recycling sentiments. Units available with Cash Buyers could potentially see offers that reflect the recent correction in rates, making some earlier fixtures more challenging to handle.
Looking ahead to 2024, an increase in tonnage is anticipated. All sub-continent destinations are expected to become busy once again. Market players, especially those in Alang, are preparing for lower numbers in the next batch of sales, aligning with the recent rate corrections. Recyclers are adopting a cautious approach, closely monitoring market movements before making firm offers on any tonnage.
However, amidst these challenges, the Turkish market stands in a weakened state. Fundamentals are submerged in negative sentiments, compounded by an ongoing shortage of tonnage. This situation makes local business sustainability an increasingly ambitious endeavor. It is imperative for all markets, particularly Bangladesh and Pakistan, to address their ongoing economic and financial issues. Restoring stability to these markets is crucial. Although the recent decline in prices has not been as dramatic as some feared, obtaining firm offers may remain challenging in the coming weeks.
In conclusion, the ship recycling industry is navigating rough waters due to a drop in supply, declining steel prices, and economic uncertainties in key markets. Market players are adopting a cautious stance, hoping for a turnaround in the near future. As the industry faces these challenges head-on, stability and resilience will be key to weathering the storm and ensuring the sustainable growth of the ship recycling market in the long run.