GMS (www.gmsinc.net), the leading global cash buyer of ships, has noted that despite a mostly neutral-to-positive budget in Bangladesh last week, the Central Bank has unexpectedly imposed restrictions on L/Cs (Letter of Credit) once again. This move is reportedly due to the ongoing shortage of foreign currency and U.S. Dollar reserves in the country, resulting from persistent inflation and currency depreciation. Local discussions are underway to address and resolve this situation. However, as a consequence, the sale of ships to Bangladesh has temporarily halted, as vessel financing and L/Cs are essential for procurement. On a positive note, Indian market conditions have improved, with recent positive movements in the Indian Rupee and steel prices. This has encouraged end buyers to increase their offers, potentially benefiting cash buyers who have previously offered above market levels on certain units.
In a separate report, shipbroker Clarkson Platou Hellas highlighted the stable market conditions, frustrating recyclers with empty yards due to a lack of available tonnage. During the Tradewinds Shipowners Forum at Norshipping, discussions revolved around future opportunities in LNG fuel and cleaner emissions, emphasizing the need to renew the existing global fleet for environmentally friendly trades.
Despite the push for ship owners to meet new environmental standards or consider recycling their aging vessels, the supply of units available for recycling remains limited. However, pressure on ship owners is expected to increase in the coming years, leading to a rise in supply to the recycling industry from the fourth quarter of this year onwards. Currently, Bangladesh and India dominate the ship recycling market in the Indian subcontinent, while Pakistan is unable to participate due to ongoing financial challenges.
A significant development in the ship recycling market occurred this week. Allied Shipbroking reported that the Bangladesh government’s approval has taken a major step towards the ratification of the Hong Kong Convention (HKC) on ship recycling. This move represents progress towards more sustainable ship recycling practices, although there is still room for further improvement. Meanwhile, the market remains weak, and there has been a limited number of vessels heading for demolition in recent weeks. With the dry bulk market stabilizing and potentially recovering, the availability of recycling candidates is expected to decrease further. Tanker earnings support the longevity of vessels, and unless there is a significant decline in market demand, only the oldest vessels are likely to enter the market for sale. MSC has made significant sales to Indian HKC yards, with seven vessels sold so far this year, providing support to the Indian ship recycling industry.