Ship Recycling: India Surges-Bangladesh Slips- and Pakistan Stalls
With national elections in India just around the corner, the ship recycling industry is experiencing contrasting fortunes across South Asia.
India’s Alang Yards Anticipate Boom
In India, ship recyclers are buzzing with activity. Global Metals Supply (GMS), a leading buyer of used ships, predicts a positive outlook for Alang, the world’s largest shipbreaking yard. They believe a potential victory for incumbent Prime Minister Narendra Modi will bring stability and economic growth, benefitting the domestic recycling industry. This could usher in a “reinvigorated period” for Indian shipbreakers.
Bangladesh Faces Challenges
Across the Bay of Bengal, the situation in Bangladesh is less rosy. The Bangladeshi currency, the taka, has weakened significantly against the US dollar. This, coupled with dwindling foreign currency reserves, could lead to stricter regulations on approving financing for ship purchases (letters of credit). To make matters worse, steel plate prices, a key factor in recycling profitability, remain stagnant.
Pakistan Loses Ground
Pakistan’s ship recycling industry is also facing difficulties. GMS reports that most viable ships available for recycling adhere to the stricter Hong Kong Convention standards. These ships are often sent to India or, for those arriving from the east, to Bangladesh due to their geographical convenience. Pakistani recyclers are struggling to compete at auctions, and their local ports haven’t seen any new arrivals recently.
Turkey Holds Steady
The Turkish ship recycling sector presents a more stable picture. While Turkish Lira hasn’t strengthened significantly against the dollar, interest rates have remained stable. However, GMS suggests that Turkish buyers are currently looking for alternative sources of ships beyond their usual suppliers.
Price Standings: Bangladesh Leads, India and Pakistan Trail
Current price estimates paint a clear picture. Bangladesh leads the pack with containers fetching $560 per light displacement ton (ldt), followed by tankers at $540 and bulkers at $520. Indian recyclers typically offer around $10 less across the board, while Pakistani yards fall even further behind by another $10. Turkish prices are estimated to be significantly lower, hovering around $380, $370, and $360 for containers, tankers, and bulkers, respectively.
GMS, known as the world’s largest cash buyer of end-of-life ships, predicts that recycling yards in Alang will likely stay in positive territory, possibly even experiencing a revitalized period. The company believes that if Narendra Modi secures victory, it will reassure domestic recyclers and give a boost to the domestic economy.
However, the outlook isn’t as rosy elsewhere. The Bangladeshi taka has been weakening, slipping to around 117 against the dollar last week. Moreover, a continued outflow of foreign currency reserves might lead to more restrictions on letter of credit approvals from the central bank. Adding to the gloom, steel plate prices remain stagnant.
In Pakistan, the situation isn’t much better. Most viable candidates are being targeted for recycling under the Hong Kong Convention, and the few available units are mostly being sent to India or, for ships coming from the east, to Bangladesh, which is more conveniently located.
Gadani recyclers are losing out in bidding competitions, according to GMS, and this trend is reflected in the lack of new arrivals at the local waterfront.
The Turkish lira has maintained relative stability against the dollar, and interest rates have remained unchanged for the past couple of weeks. However, GMS notes that buyers in Aliaga are still seeking tonnage that isn’t currently heading their way.
As for prices, Bangladesh leads the pack, albeit shakily, with containers at $560 per ldt, tankers at $540, and bulkers at $520. Indian recyclers lag behind by about ten dollars across the board, while Pakistani recyclers are in third place, another ten dollars lower. Turkey likely sees indicative prices around $380, $370, and $360 for the three types of ships respectively.
In Conclusion
The upcoming Indian elections are casting a long shadow on the South Asian ship recycling industry. While India anticipates a boom, Bangladesh and Pakistan grapple with currency fluctuations, financing challenges, and a lack of competitive offers. Turkey, meanwhile, maintains a wait-and-see approach, potentially seeking alternative ship sources.
