Challenges and Slow Progress: A Closer Look at the Current State of the Ship Recycling Market
In recent times, the ship recycling market has maintained a sluggish pace, reflecting a lack of activity and optimism for a change in the pattern for the remainder of the year. According to shipbroker Clarkson Platou Hellas’ latest weekly report, the market continues to be slow, with little movement and a sense of hopelessness prevailing. Surprisingly, there was no expected ‘post’ Diwali boom, and instead, the Indian market opened with a concerning plummet in domestic steel markets. Sentiments remained low throughout the week, with minimal demand locally for finished steel, despite the lack of tonnage.
The shipbroker noted that the price of all grades of steel has been dropping daily, contributing to the overall negative atmosphere. However, some stability seems to have returned towards the approaching weekend, raising hopes for a halt to the downward trend. The upcoming elections in January in Bangladesh add an element of uncertainty to the market, with recyclers showing little interest in acquiring tonnage until the political and economic landscape becomes clearer. The shipbroker highlighted reports that banks have informed their clients that they will not open any Letters of Credit until the New Year, further complicating matters.
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In a separate note, shipbroker Allied added insights, stating that Indian breakers have returned to business, but there has been no post-Diwali rush of activity. Mixed signals in the steel market have made buyers cautious across the Indian Sub-continent. The market remains little changed, with flat prices and low activity levels. Alang continues to be the prevailing market leader, having acquired 2 bulkers and a tanker over the past week. The note suggests that Alang is likely to be the destination for the ‘MSC Rita,’ considering its status as the leading source of container tonnage, especially with green recycling requirements attached to the sale.
The note also mentioned that buyers in Bangladesh and Pakistan are awaiting an easing of Letter of Credit (LC) difficulties. Promising developments with the International Monetary Fund (IMF) might bring relief, supporting a potential rise in sales to Gadani, particularly as buyers’ offers are competitive with Indian breakers, pending access to dollars.
GMS, the world’s leading cash buyer of ships, shared insights in its latest weekly report, indicating that sub-continent pricing and sentiments remain low, stuck in the low 500s/LDT and even below for certain units. As the year-end approaches, there are very few serious and enticing levels to induce owners or cash buyers to sell.
The report highlighted that Letters of Credit and available financing pose significant challenges in both the Pakistan and Bangladesh markets, resulting in tentative offers, especially for smaller LDT vessels, given the precarious nature of their respective economies. LCs and available financing remain a big issue in both the Pakistan and Bangladesh markets, and there are only very tentative offers emanating as a result, on mostly smaller LDT vessels such is the precarious nature of their respective economies.
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Despite the challenges, GMS noted that the container and dry bulk markets continue to provide a limited supply of vessels for recycling. One sale from each sector was concluded during the week, likely destined for the reliable shores of Alang, although the ‘as is’ vessel could potentially end up anywhere if a specific buyer emerges.
In conclusion, the ship recycling market faces a multitude of challenges, including fluctuating steel prices, political uncertainties, and financial hurdles. The slow pace of activity, coupled with low sentiments and limited financing options, has created a complex environment for shipowners, cash buyers, and recyclers alike. The industry is closely watching political developments, hoping for clearer economic landscapes and easing of financial constraints to spur a more optimistic outlook in the coming months.
