Riding the Tides: The Turbulent Journey of Ship Prices in 2023
As the international ship recycling community wraps up the year, there’s a sense of mixed emotions, according to the insights shared by cash buyer GMS. Reflecting on the past year, GMS notes that 2023 has seen more concluded deals compared to the previous year, which marked a decade-low in terms of the volume of vessels recycled. However, despite the increased activity in recycling, the industry still struggles to achieve the necessary number of permanent exits to balance the global fleets.
The journey through 2023 has been tumultuous for prices in the ship recycling market. Peaks, soaring well above USD 600/LDT, were experienced in the first half of the year. This was followed by a familiar pattern, the traditional summer/monsoon collapse, during which about USD 150/LDT was wiped off in a matter of a few short months – a trend that persisted even after the rains.
GMS highlights the tough year experienced by ship owners, cash buyers, and vessel recyclers, as losses continued to mount. Financing challenges have compounded the difficulties for these stakeholders, especially in Pakistan and Bangladesh. Despite a growing demand and the gradual clearing of domestic yards, the majority of domestic banks in these countries remain hesitant to provide fresh financing or lines of credit for new vessel purchases.
“As a cheat sheet on the eve of the New Year, we would like to remind our readers that financing issues continue to persist in both Pakistan and Bangladesh – with a majority of their domestic banks still unwilling to sanction fresh financing / lines of credit on new vessel purchases, even though demand has been firming and domestic yards are starting to gradually empty out,” states GMS.
However, amidst the challenges, there is a glimmer of optimism fueled by international steel and commodity prices holding firm. Many in the industry believe that vessel prices have reached their lowest point across the sub-continent markets, offering a ray of hope for the future.
Looking back at the year, 2022 stands out as the weakest in the past decade in terms of the volume of vessels recycled in a single year. The comparison with 2023 reveals a positive trend, with more deals being concluded. Despite this improvement, the industry still falls short of achieving the necessary number of permanent exits to bring equilibrium to global fleets.
The pricing dynamics in 2023 have been a rollercoaster ride. In the first half of the year, prices surged well beyond USD 600/LDT, only to experience a significant dip during the traditional summer/monsoon period. The downturn persisted even after the rains, with approximately USD 150/LDT being shaved off within a few short months.
GMS underscores the persistent challenges faced by ship owners, cash buyers, and vessel recyclers throughout the year. The financial toll has been severe, with losses accumulating for these stakeholders. Additionally, financing issues have exacerbated the situation, particularly in Pakistan and Bangladesh. Despite a growing demand for vessel purchases and the gradual reduction of inventory in domestic yards, the reluctance of domestic banks to provide fresh financing or lines of credit has added another layer of complexity.
The reluctance of banks in Pakistan and Bangladesh to sanction new financing or lines of credit for vessel purchases persists as a significant hurdle. Even though demand is on the rise and domestic yards are gradually clearing out, the majority of domestic banks in these countries remain unwilling to extend financial support.
“As a cheat sheet on the eve of the New Year, we would like to remind our readers that financing issues continue to persist in both Pakistan and Bangladesh – with a majority of their domestic banks still unwilling to sanction fresh financing / lines of credit on new vessel purchases, even though demand has been firming and domestic yards are starting to gradually empty out,” emphasizes GMS.
Despite the challenges and uncertainties, there is a glimmer of hope in the form of cautious optimism. The international steel and commodity prices have remained resilient, providing a stabilizing factor for the industry. Many industry insiders believe that vessel prices have reached their bottom across the sub-continent markets, signaling a potential turning point.
In conclusion, the year 2023 has been a mixed bag for the international ship recycling community. While there has been an improvement in the number of deals compared to the previous year, the industry still grapples with the challenge of achieving the necessary number of permanent exits to balance global fleets. Pricing fluctuations have added to the complexities, with significant peaks and troughs throughout the year. The financial strain on ship owners, cash buyers, and recyclers has been substantial, exacerbated by persistent financing issues, particularly in Pakistan and Bangladesh. However, the optimism derived from stable international steel and commodity prices suggests a potential upswing in the industry, offering a ray of hope as the community enters the new year.
