Ship Breaking in the Subcontinent Hits Rough Waters
The ship recycling industry in India and Bangladesh is facing a perfect storm of bad news, according to reports from cash buyer GMS. Local currencies and steel plate prices have taken a nosedive, further squeezing profit margins for shipbreakers. This comes on top of ongoing problems in other major shipbreaking countries like Turkey and Pakistan.
Double Whammy: Currency & Steel Prices Sink
GMS paints a grim picture of the industry, highlighting the significant decline in both local currencies and steel plate prices in India and Bangladesh. Steel plates are a key product derived from dismantled ships, and their price directly affects the profitability of the entire shipbreaking process. A weaker currency makes it more expensive for shipbreakers to buy ships from international sellers, further adding to their woes.
Global Market Feels the Pain
The troubles in the Indian subcontinent are having a ripple effect on the global ship recycling market. GMS reports that “vessel prices and demand” are experiencing a downturn across the board. This “industrywide suffering” is further compounded by the lackluster performance of other major shipbreaking countries like Turkey and Pakistan.
Geopolitics Creates Supply Bottleneck
The political situation in the Middle East is also throwing a wrench into the works. GMS expects this to continue limiting the supply of ships available for scrapping in the near future, likely stretching into the fourth quarter of 2024. This, however, could be a silver lining for shipping companies, as it might help maintain strong freight rates across key sectors despite the usual summer slowdown.
Bangladesh in Turmoil: Unrest Disrupts Business
Adding to the subcontinent’s woes, Bangladesh is grappling with escalating student riots. The violence has resulted in a rising death toll and widespread disruptions to mobile and internet services. This is particularly concerning as it’s affecting major financial hubs, hindering the ability of shipbreakers to conduct normal business.
India’s Budget Looms Large, Casting a Shadow
All eyes in India are on the upcoming national budget announcement scheduled for July 23rd. GMS expresses concerns that the budget might be negative, given the recent slump in key economic indicators. A negative budget could further dampen the shipbreaking market, creating a scenario where shipowners selling their vessels to Alang (a major shipbreaking yard in India) might end up losing money due to inflated purchase prices set before the budget announcement.
Pakistan: A Safe (But Less Profitable) Option?
With India’s market looking shaky, the focus seems to be shifting towards Pakistan, where shipbreaking prices remain relatively stable, albeit lower than the coveted $500 per Lightweight Ton (LDT) mark. However, GMS suggests that for ships not containing hazardous materials like asbestos (HKC), Pakistan might be a safer bet compared to the uncertainties surrounding the Indian market.
Overall, the outlook for the shipbreaking industry in the Indian subcontinent is bleak. A combination of economic woes, political instability, and an unpredictable budget announcement is creating a challenging environment for shipbreakers. While the global supply of ships for scrapping might be limited due to geopolitical issues, this doesn’t necessarily translate to good news for the subcontinent’s shipbreaking industry.
