Ship Recycling Market Remains Stagnant Despite Increased Demand for Scrap Vessels
The ship recycling industry continues to struggle, despite an increase in demand for ships to be dismantled. This is according to a recent report by Best Oasis, the world’s leading cash buyer of ships.
Market Stagnation Across Key Regions:
The report highlights the sluggishness across major ship recycling destinations like India, Bangladesh, Pakistan, and Turkey. These countries are experiencing:
- India: A significant drop in demand for both vessels and scrap materials, indicating market stagnation.
- Bangladesh: Low transaction volumes and a lack of deals, with recyclers unable to find vessels at desired prices and ship owners waiting for better offers.
- Pakistan: Continued decline in demand due to slowdowns in the steel and construction sectors.
- Turkey: A downward trend with falling import prices, despite efforts to stabilize the market.
Factors Contributing to Stagnation:
The report attributes this stagnation to a combination of broader economic challenges and industry-specific dynamics:
- Global Steel Production: A 1.6% decrease in global steel production in January 2024 compared to the previous year, potentially reducing demand for recycled steel from dismantled ships.
Contrasting Signals and Future Outlook:
Despite the current stagnation, there are some contrasting signals:
- Increased Steel Demand Projection: Best Oasis also reports a forecast anticipating a notable surge in global oil demand in 2024, which could lead to increased steel demand in the long run.
- Limited Supply of Available Ships: Shipbroker Clarkson Platou Hellas reports a dwindling supply of ships available for dismantling, potentially leading to price increases in the future.
Owners Holding Onto Ships Due to Favorable Market Conditions:
Another report by shipbroker Banchero Costa suggests that ship owners are reluctant to sell their vessels for scrapping due to:
- Improved freight and charter rates: Generating higher profits for owners and making scrapping less attractive.
- Rising second-hand values: Even older ships are fetching good prices due to the current market dynamics.
Overall, the ship recycling market faces a complex situation. While demand for scrap vessels exists, broader economic factors and favorable market conditions for ship owners are creating a period of stagnation in the short term.
The ship recycling market continues to grapple with a downturn, despite an uptick in interest from cash buyers seeking demolition candidates. Best Oasis, a leading cash buyer, outlined in its latest report the challenges faced by key recycling destinations such as India, Bangladesh, Pakistan, and Turkey.
In India, there’s a noticeable decline in demand for vessels and scrap materials, indicating a market slowdown. Similarly, Bangladesh is experiencing a cautious sentiment with low transaction volumes and a scarcity of deals, as recyclers struggle to find vessels at desirable prices. Pakistan is also witnessing a decline in demand, influenced by sluggishness in the steel and construction sectors. Meanwhile, Turkey’s market is on a downward trajectory, with import prices dropping, albeit efforts are underway to stabilize it.
These observations underscore a period of adjustment across major ship recycling hubs, reflecting broader economic challenges and industry-specific dynamics. The decline in global steel production by 1.6% in January 2024 compared to the previous year further contributes to the subdued market conditions.
Contrary to the decline in steel production, January 2024 saw a significant 9.1% increase, suggesting a potential turnaround. Forecasts from energy research firms and organizations like OPEC anticipate a surge in global oil demand in 2024, aligning with the expectations of industry experts.
Shipbroker Clarkson Platou Hellas noted a slight upturn in price indications, likely due to dwindling supply. Reports indicate minimal new arrivals for recycling clearance in key destinations like Alang, Pakistan, and Bangladesh, reinforcing the notion that ship owners are capitalizing on improving freight rates and increasing second-hand values.
Banchero Costa echoed similar sentiments, highlighting the scarcity of viable demolition candidates despite high demand from end and cash buyers. With strong spot rates for Capesize, Panamax, Supra, and Handys vessels, ship owners are inclined to hold onto their tonnage rather than opting for scrapping.
