Global Chaos: Middle East Conflict’s Ripple Effect on Ship Recycling
The Middle East, a region historically fraught with tensions, has once again become a focal point of global turmoil. According to the latest weekly ship-recycling report from GMS, the escalating conflicts and military actions in the region have had a profound impact on global trade, economics, and, consequently, the ship-recycling industry.
A Region in Turmoil The phrase “Fauda,” which translates to “chaos” in Arabic, aptly describes the situation in the Middle East this week. Israeli Prime Minister Benjamin Netanyahu’s vow to dismantle Hamas has led to an increase in the number of suspected Hamas militant leaders killed in Gaza. In retaliation, Hamas has recovered the bodies of six Israeli hostages from its tunnels, signalling a confrontation with ISIS militants that has resulted in injuries to seven U.S. troops deployed in Iraq.
Adding to the regional instability, Ukraine’s kamikaze drone attacks on Russia’s main oil refinery and the repeated Houthi attacks on the container vessel “Groton” in the Red Sea have further heightened tensions and increased the volatility index for the region. These developments have had a direct impact on global inflation and freight rates, which have already reached record highs.
Impact on Ship Recycling The tumultuous situation in the Middle East has exacerbated the already slim pickings of tonnage in the ship recycling market. As a result, the vessel offerings have declined by approximately USD 60/LDT (and growing) since the peaks witnessed earlier this year. Dry units are now seeing levels firmly below USD 500/LDT across sub-continent destinations, particularly for smaller LDT, laid-up, Far-Eastern built, owned, and operated units.
The dearth of large LDT vessels has provided some relief to the Bangladeshi and Pakistani markets, where L/C and banking limits for a growing number of recyclers have been stretched. Bangladesh, in particular, has faced significant challenges, including drastic social and political upheavals, untimely deaths of hundreds of students, the ousting of Prime Minister Hasina, and devastating floods. India, meanwhile, has experienced a depressive movement following the announcement of its recent budget.
Domestic Challenges for Indian Recyclers Indian recyclers in Alang remain frustrated with the newly formed coalition government’s deprioritization of domestic infrastructure projects. Additionally, the ongoing import of cheap Chinese steel continues to afflict the recycling industry, leading to the undercutting of prices on local inventories. As a result, recyclers in Alang and Gadani are hesitant to offer afresh on tonnage, fearing further price declines.
A Call for Global Peace Amid these tumultuous times, the focus should not be solely on buying ships but rather on initiating some form of global peace. A more stable international environment would not only benefit the ship recycling industry but also contribute to a better future for all.
