Ship Recycling: Mixed reactions in market: STAR ASIA
The ship recycling markets across the Sub-continent displayed mixed reactions this week, with overall sentiment remaining subdued as the year-end draws near. Recyclers are paying close attention to the dry bulk segment, which continues its downward trajectory. This trend is fueling expectations that a long-anticipated influx of end-of-life could soon materialise, shaping up the price dynamics.
On the pricing front, markets appear to have stabilised at the prevailing rates for the time being, with most ship recyclers believing that prices have bottomed out. However, new concerns, post-FED decision, persist over the strength of the US dollar, which is now becoming a key factor and under scrutiny. Market players are adopting a cautious approach as they navigate these uncertain conditions.
The persistent shortage of end-of-life vessels continues to challenge the ship recycling market. In a rare transaction within the current constrained environment, the VLCC Amor (built-in 2000 in Japan, weighing 40,584 tons) has reportedly been sold to the Alang recyclers. This marks the first VLCC sale to India since March 2020. In addition to this, a few more VLCCs have been placed in the market, and the coming week should give some clues on their sales.
Alang, India
This week saw sharp fluctuations in domestic ferrous scrap prices, prompting varied responses from recyclers. Purchases were largely need-based, with prices reflecting current market conditions rather than speculative buying.
A key topic of discussion was the continued decline in dry bulk indices, which has rekindled optimism across the industry. Recyclers anticipate a significant easing in ship supply by 2025, a development that could establish a new pricing trend and reshape the dynamics of the sector.
The domestic steel industry may see some relief as the Indian government is likely to impose a 25% safeguard duty on steel imports, following a proposal by the steel ministry aimed at curbing cheaper-origin imports, such as from China, according to Reuters.
During a 17 December meeting chaired by Commerce Minister Piyush Goyal, the proposal gained significant support, with assurances to small manufacturers that they would not face higher domestic steel prices.
With HKC coming into force in June 2025, the industry estimates 15,000 ships will need recycling over the next decade, averaging about 1,500 ships annually. Maersk, the world’s second-largest container carrier, has voiced significant concerns about this challenge, particularly regarding post-Panamax vessels. At a recent BIMCO panel discussion in Mumbai, Capt Prashant, Maersk’s Head of ESG & Public Affairs for South Asia, emphasized that the industry faces not just capacity issues but also capability challenges in meeting HKC standards.
Currently, Alang can process 4.5 million tons of steel annually from ship recycling, with plans to double this capacity to 9 million tons. Over 114 yards at Alang already comply with HKC standards, and Maersk has successfully recycled more than 20 ships at a dozen yards there. However, the facility’s draft limitations create complications for larger vessels.
While Maersk continues to recycle Panamax vessels at Alang, they express concerns about the current practice of beaching post-Panamax ships at a distance and pulling them to recycle plots during high tide, citing environmental and safety considerations.
Local industry experts and officials present a more optimistic view of Alang’s capabilities and future potential. The Gujarat Maritime Board is working to enhance the facility’s infrastructure by reviewing policies to allow for larger plot sizes through amalgamation, moving away from the current 150-meter restriction. This adaptation aims to accommodate vessels of varying sizes based on specific requirements.
The Bansal Group has successfully demonstrated this by recycling Asia’s largest post-Panamax container ship, weighing 34,000 tons, at their Alang facility. They argue that while the initial beaching might occur at a distance, the high tide method has proven effective for bringing vessels to shore safely.
The primary limitation at Alang relates not to the length of vessels but to their width, which must align with the operational yards’ dimensions. With proper planning and timing, Alang can accommodate larger vessels within its existing infrastructure.
Chattogram, Bangladesh
Market sentiment has turned increasingly cautious, with buyers adopting a selective approach amid growing uncertainty. Ship recyclers are proceeding with restraint, showing little urgency to make aggressive purchases as the year winds down. Local ship scrap prices have experienced slight corrections, reflecting weakening underlying demand.
Notably, several vessels sold recently at premium prices have yet to secure end-buyers. Industry participants remain focused on shipping trends, anticipating that a significant decline in freight rates by early 2025 could ease supply pressures. Many are adopting a wait-and-watch stance to gauge the market’s reaction in the coming months.
After a challenging 2024, the IMF’s projections offer renewed optimism for Bangladesh’s economy. The IMF projects Bangladesh’s economic recovery in FY26, with inflation easing
and growth rebounding. IMF official Chris Papageorgiou highlighted at a press briefing that inflation, expected to stay around 11% in FY25, should decline to 5% in FY26, fostering growth recovery to 6.7%. However, FY25 growth is forecasted at 3.8%, affected by disruptions like unprecedented floods and economic imbalances.
Papageorgiou emphasised structural issues driving food inflation and strong demand-side pressures. He noted persistent high inflation, double digits as of November, is straining the balance of payments and reserves, which have plummeted from US$50 billion to US$20 billion over three years.
The IMF criticised underreported non-performing loans (NPLs) in the banking sector despite government reform efforts. Challenges include global shocks, supply chain disruptions, and domestic unrest. The IMF program aims to stabilise the economy, restore sustainable growth, and address structural vulnerabilities for long-term resilience.
Gadani, Pakistan
It has been another depressed week for Pakistani ship recyclers, with limited activity reported in the market. Despite growing interest among recyclers keen to acquire tonnage after an extended period of inactivity, deals remain scarce due to persistent pricing challenges. Gadani recyclers are struggling to compete with their regional counterparts in terms of offering attractive rates, further compounding the frustration of ship-starved buyers.
This disparity in pricing continues to drive potential sellers to neighboring markets such as India and Bangladesh, where stronger offers are prevalent. Pakistani recyclers are caught in a difficult position, as they are unable to align with regional benchmarks, along with the clock ticking, to comply with the HKC certifications prior to June 2025 HKC initiatives.
The ongoing situation underscores the challenges faced by Gadani recyclers, who are trying their best to navigate rising competition in limited-supplied markets. Until pricing parity is achieved, Pakistan’s recycling yards are likely to remain stagnant.
Aliaga, Turkey
Turkish steel mills have adjusted their domestic buying prices upward this week, reflecting higher import values in the market. A significant benchmark was set by a German-origin HMS 1&2 80:20 sale at US$349/ton cfr Turkey, though subsequent transactions have settled at slightly lower levels.
Market sentiment has shifted from earlier optimistic projections of prices reaching the US$360s, as the presence of abundant offers in the market has contributed to this tempered outlook, with most market participants expecting January-shipment cargoes to remain below the US$350/ton CFR threshold.
The overall market dynamics remain challenging. Short-sea market activity has stalled due to widening price expectations between buyers and sellers, while Turkish shipbreaking scrap prices have remained unchanged from last week at US$340/ton delivered.
Sub-Continent and Turkey ferrous scrap markets insight
The Indian Sub-Continent imported ferrous scrap market exhibited an upward trajectory in prices, driven by higher offers for EU- and US-origin shredded scrap amid rising collection costs. Turkey, however, remained an exception as prices softened due to bid-offer mismatches and cautious buying.
India: Market Influenced by High Offers and Holidays
Imported scrap offers from European recyclers rose following a high-priced Turkish deal earlier in the week. Shredded scrap was reported at US$390-393/ton CFR Nhava Sheva, with dock collection prices climbing to EUR 282-283/ton, reflecting a week-on-week increase of EUR 7-8.
Meanwhile, shredded scrap offers from the US were quoted at US$392-395/t, but negotiations stalled as buyers hesitated and sellers resisted price reductions. PNS scrap was priced at US$390/ton CFR Mundra, with sellers seeking US$397/ton, creating a US$7/ton bid-offer gap.
Market participants remain wary of the potential impact of safeguard duties, which could disrupt trade by benefitting local steelmakers while raising steel prices for industries, especially MSMEs.
Pakistan: Modest Activity Amid Higher Costs
The Pakistani imported scrap market showed signs of recovery, with suppliers quoting US$395-400/ton CFR Qasim for shredded scrap, reflecting increased collection costs. Buyers negotiated for bulk orders at US$385-388/ton, while smaller lots (500 tons) were only available at prices above US$390/ton.
Bangladesh: Buyers Stay on the Sidelines
In Bangladesh, imported scrap prices saw slight movements, though trade activity remained muted due to buyers’ reluctance. EU-origin shredded scrap offers ranged between US$395-400/ton, while HMS was offered at US$375/ton CFR. However, buyers countered with US$15-20/ton lower bids, which failed to garner supplier interest.
Domestic scrap prices dropped to BDT 46,000-47,500/ton, down from the previous week’s BDT 48,000-48,500/ton. Rebar prices in Dhaka stood at BDT 77,000/ton, with prices in Chattogram BDT 4,000/ton higher. A leading mill official said, “We are waiting for clearer price direction in early January.”
Turkey: Softer Market on Cautious Buying
In Turkey, imported scrap prices weakened amid bid-offer disparities. EU/Benelux-origin HMS (80:20) scrap was traded at US$345-346/ton CFR, while premium US/Baltic-origin HMS (80:20) scrap ranged between US$350-355/ton CFR. Seller targets for US/Baltic-origin HMS stood at US$355-360/ton CFR.
A Turkish mill source stated, “We’ve made our purchases and are out of the market for now. Prices are high and could come under pressure soon.” Mills largely adopted a wait-and-see approach, anticipating further price corrections due to slower rebar sales.
