Ship Recycling in Rough Waters: Monsoon Season and Economic Challenges

Ship Recycling in Rough Waters: Monsoon Season and Economic Challenges

The ship recycling industry in India and Bangladesh is facing a tough summer, hit by a combination of seasonal and economic factors. This report by GMS highlights the current challenges:

Double Trouble: Monsoon and Market Downturn

The monsoon season brings literal storms and disrupts the market. Ship owners and cash buyers are struggling as steel plate prices, a key material recycled from ships, have plummeted. Additionally, currency fluctuations in key destinations are making deals difficult. This unexpected setback comes just as businesses were hoping for a pick-up after the monsoon break.

Geopolitical Tensions Affecting Supply

The ongoing conflicts in the Middle East, with Israeli strikes in the north and US involvement in the south of the Red Sea, are causing delays in commercial shipping. This could potentially lead to a shortage of ships available for recycling, pushing up freight rates and global inflation.

Indian Market on Hold

The Indian economy is currently in a wait-and-see mode after the elections and before the upcoming budget announcement in late July. This uncertainty is impacting infrastructure projects, which are major consumers of recycled steel. As a result, Indian buyers are cautious and waiting for the budget to get a clearer picture of the market’s direction.

Similar Situation in Bangladesh

Bangladesh is also facing a slowdown. With only a few small ships arriving recently and a rise in fuel costs, vessel prices have dropped. This makes it a difficult time for the Bangladeshi ship-recycling industry.

A Glimpse of Hope in Pakistan

The Pakistani market, however, saw a small positive development with a couple of private sales reported this week. While Gadani, the main ship-breaking yard in Pakistan, cannot compete directly with Alang (India) or Chattogram (Bangladesh) on price, it offers some advantages. Geographically positioned vessels with specific crew nationalities might find it more cost-effective to head to Gadani due to lower delivery costs and the absence of beaching restrictions caused by tides.

Limited Buyers, Excess Inventory

Across all markets, there’s a shortage of viable buyers for the ships available for scrapping. This situation presents an opportunity for recyclers to utilize their currently empty plots. They might even consider offering above-market prices to secure deals, even at a potential loss, to keep their operations running.

Conclusion: A Summer of Digestion and Opportunity

The current situation presents a challenging summer for the subcontinent’s ship-recycling industry. However, with fewer ships available due to monsoon and geopolitical issues, recyclers have a chance to catch up on processing the backlog of ships delivered recently. Additionally, offering competitive prices could help fill their empty plots and keep their businesses afloat.

Notwithstanding, the one bright spot for the week saw something of a renaissance for the beleaguered Pakistani market as news of a couple of private sales emerged this week. Although Gadani is not quite on the same competitive level as Alang or even Chattogram, for certain geographically positioned vessels looking for lower delivery costs and with certain crew nationalities on board, it seems to make more sense for such units to head to Gadani shores and contend with no beaching tides. Lastly, Turkey on the far end is.

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