Ship Recycling: Activity Heats Up in India
This week in the ship recycling industry, things were relatively quiet compared to the previous week’s surprise depreciation of the Bangladeshi Taka. However, underlying concerns simmer in Bangladesh, while India takes center stage with renewed buying activity.
Bangladesh Grapples with Currency Depreciation
Cash buyer GMS reports a slowdown in sales and activity in Bangladesh due to the recent weakening of the Taka against the US Dollar. The currency has slipped further to 117 Taka per dollar, raising concerns for domestic ship recyclers.
People who recycle ships in Bangladesh are worried about what might happen next. The Taka’s value slipped even more against the U.S. Dollar, reaching BDT 117. This means it costs more to do business with foreign countries. There’s concern that the government might put even tighter restrictions on spending money abroad. This could make it harder for businesses to get the approval they need to import goods. And it’s not just that—the price of steel plates, which are used in ship recycling, hasn’t been doing well either. This makes it more expensive for local buyers to recycle ships in Bangladesh.
A depreciating Taka makes it more expensive for Bangladeshi companies to buy ships and recycle them. This is because most transactions are conducted in dollars, and a weaker Taka means they need more Taka to buy the same amount of dollars.
Limited Approvals and Plate Prices Add to Bangladesh’s Woes
GMS also highlights the growing fear of further restrictions on issuing Letters of Credit (L/Cs) in Bangladesh. L/Cs are crucial for financing ship purchases, and limited approvals could significantly impact the industry.
Adding to the troubles, local steel plate prices remain stagnant, further squeezing profit margins for Bangladeshi recyclers. The high cost of steel plates, a key product obtained from recycled ships, makes the entire process less profitable.
India Steps Up Activity
In contrast to Bangladesh’s struggles, the Indian ship recycling market in Alang is experiencing a surge. There’s been renewed aggression from Indian recyclers to acquire ships, resulting in several successful bids. This positive sentiment is likely fueled by a recent jump in local steel plate prices by $5 per ton.
Pakistan’s Struggles Continue
Meanwhile, Pakistan’s ship recycling industry faces renewed challenges. A lack of motivation among Gadani recyclers has resulted in missed opportunities to acquire ships. The reasons behind this lack of motivation are not mentioned in the report.
Turkey Remains Quiet
There’s no significant news from Turkey this week. The report suggests the market is experiencing a period of quiet stability.
Global Market Update
While most ship recycling nations saw a week of relative stability in terms of currency exchange rates, the US dollar remains strong compared to most. This benefits most countries except Bangladesh, where the Taka’s depreciation is causing problems.
Steel plate prices in Pakistan and Bangladesh remain low, while India saw a slight increase. This price hike in India further boosts optimism in Alang, especially with the ongoing Indian general election expected to result in a victory for Prime Minister Modi.
Looking Ahead
The report offers a glimpse of hope for a slight increase in available ships on the market, particularly for resale to Hong Kong Cash Buyers (HKC). This could lead to more deals being finalized in the coming weeks. Additionally, there’s an expectation of increased ship supply towards the end of the third quarter or early in the fourth quarter, possibly due to anticipated fluctuations in freight rates.
Looking ahead, it seems there will be more ships available for sale soon, mostly for resale under international recycling standards. This means there could be more deals happening in the coming weeks. And by July, the situation is expected to improve even more. Freight rates are likely to drop, and more ships will be available for recycling in the third and fourth quarters of the year.
Overall, this week’s report highlights the contrasting fortunes of different ship recycling nations. While Bangladesh faces economic headwinds, India is experiencing a surge in activity. Pakistan continues to struggle, and Turkey remains relatively quiet.
