Ship Recycling: The Indian market remains in a holding pattern: STAR ASIA

Ship Recycling: The Indian market remains in a holding pattern: STAR ASIA

This week, Danish shipping giant Maersk signed a memorandum of understanding (MoU) with the Egyptian government to explore the development of a green ship recycling facility at Damietta port, situated west of Port Said on the Mediterranean coast. This move aligns with Egypt’s strategy to reduce dependence on imported scrap metal and bolster its ship recycling capabilities.

The proposed facility, spanning approximately 155,000 square meters, will be equipped to handle vessels up to 230 meters in length. Crucially, the site will adhere to the standards set by the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, which is expected to come into force soon. Discussions are also underway for additional ship recycling sites across Egypt.

Maersk’s commitment to sustainable ship recycling is not new. Following its acquisition of P&O Nedlloyd, two decades ago, the company played a pivotal role in transforming China’s leading demolition yard into a greener operation. The planned facility in Egypt represents a continuation of Maersk’s efforts to promote environmentally responsible ship recycling practices worldwide.

Ship recycling markets across the Indian subcontinent have experienced a slowdown due to a continued shortage of end-of-life vessels, leaving industry players uncertain about

the near-term outlook. Expectations of an influx of ships heading for demolition have not materialised, leading to subdued activity and heightened confusion within the market.

Alang. India

The Indian ship recycling market remains in a holding pattern, recyclers are stuck in a Groundhog Day, waiting for new tonnage to arrive.

In other news, a significant development is unfolding in India’s ship-breaking industry as the Nolan, a Suezmax vessel sanctioned by the United States in 2019 for transporting Iranian oil, undergoes dismantling at Alang. This marks a potential watershed moment for the so-called “dark fleet” – hundreds of blacklisted tankers that continue operating globally despite sanctions.

The vessel, built in 1998 and previously named Solan, arrived in Alang waters on January 25 after being idle for nearly a year. According to Bloomberg.com, Indian officials verified its documentation before allowing it to beach on February 1.

While these ageing ships have remained operational primarily to transport Russian and Iranian oil, Washington’s recent targeting of such vessels has forced many to sit idle, prompting owners to seek financial returns through scrapping. Industry experts anticipate more sanctioned tankers may follow, with the Bluefins currently anchored offshore and the Amor, the first dark fleet VLCC marked for scrapping, recently spotted at an Indonesian yard.

Despite this emerging trend, many in the industry remain nervous about potential penalties for handling sanctioned vessels, with some seeking clarification without receiving clear guidance.

The geopolitical landscape continues to evolve, particularly with President Trump’s recent pivot toward Moscow potentially easing the transport of Russian crude and potentially reducing demand for dark fleet operations.

Anchorage & Beaching Position (FEBRUARY 2025)

Chattogram, Bangladesh

The Bangladeshi ship recycling market remained quiet this week as activity slowed with the onset of Ramadan. Previously sold vessels continue to arrive at Chattogram yards, keeping supply levels steady.

Domestic ship scrap prices remained stable amid moderate demand, though overall market sentiment remains subdued. With limited buying interest and economic uncertainties persisting, the outlook for the coming weeks remains cautious.

On the economic front, the Bangladesh Bank has embarked on an initiative to stabilize the struggling taka, which has suffered an 8% depreciation in 2024, making it Asia’s poorest-performing currency this year. At the root of this plan is a shift toward market-oriented processes through daily recalibration of exchange rates, building upon the crawling peg system introduced last year to reduce volatility.

Financial institutions can now negotiate foreign currency trades within established parameters, while the central bank guides twice-daily reference exchange rate publications. These measures align with IMF recommendations and are crucial for securing continued financial support from the global lender.

The interim government led by Nobel Prize recipient Muhammad Yunus has prioritized economic recovery following a period of political instability. While Yunus works to rebuild market confidence, several obstacles remain on the horizon. Global trade uncertainties, potential inflationary pressures, and the need to establish democratic governance through elections all pose significant challenges.

Anchorage & Beaching Position (FEBRUARY 2025)

Gadani, Pakistan

Markets in Gadani have shown no change over recent weeks, with no new developments to report. As Ramadan approaches, industry observers expect activity to remain stagnant, suggesting that conditions are unlikely to improve in the near term.

Aliaga, Turkey

The market remains quiet with no new activity to report.

Meanwhile, Turkey’s economic confidence index declined by 0.5% m-o-m to 99.2 in February, failing to sustain January’s uptick. Economists surveyed forecast Turkey’s 2024 GDP growth at 3% compared to 2023, with estimates for Q4 2024 growth ranging between 0.7% and 3.9%.

Turkish shipbreaking scrap prices was at US$340-357/ton delivered on Friday while the Turkish currency was pegged at TRY 36.52/dollar at business close.

Ship Recycling Market Snapshot

• All prices are USD per light displacement tonnage in the long
• The prices reported are net prices offered by the recycling
• Prices quoted are basis simple Japanese / Korean-built tonnage trading Premiums are paid on top of the above-quoted prices based on quality & quality of Spares, Non-Fe., bunkers, cargo history, and maintenance.

5-Year Ship Recycling Average Historical Prices  (Week 9)